An International Monetary Fund (IMF) staff team led by Ms. Uma Ramakrishnan
visited Kingston from February 25–March 8, 2019, to conduct discussions on
the fifth review of Jamaica’s financial and economic program supported by
the IMF’s precautionary
Stand-By Arrangement
(SBA).
At the end of the visit, Ms. Ramakrishnan issued the following statement:
“The IMF team reached a preliminary agreement with the Jamaican authorities
on a set of policies that aims to complete the fifth review under the SBA.
Consideration by the IMF’s Executive Board is tentatively scheduled for
April 2019. Upon approval, an additional SDR 160.8 million (about US$224
million) will be made available for Jamaica, bringing the total accessible
credit to about US$1.4 billion. The Jamaican authorities continue to view
the SBA as precautionary.
“Strong implementation of the reform program continues, with the sustained
commitment yielding tangible dividends for the people of Jamaica.
Unemployment is near all-time lows, business confidence is high, and the
economy is estimated to have expanded by 1.8 percent in 2018, buoyed by
mining, construction and agriculture. International reserves are estimated
to be comfortable under a more flexible exchange rate. All quantitative
performance criteria at end-December 2018 were met, and the structural
benchmark to table in Parliament amendments to the Bank of Jamaica (BOJ)
Act was completed in October 2018. Inflation, however, was 2.4 percent in
December 2018, triggering staff consultation under the Monetary Policy
Consultation Clause.
“With improving public debt dynamics, staff supports the reduction in the
primary surplus target by ½ percent of GDP to 6½ percent in the budget for
FY19/20 to further boost growth and job creation. The additional space
accommodates much-needed growth-enhancing and social spending for citizen
security, PATH, and rural infrastructure. Staff also welcomes the
reductions of the distortionary financial turnover taxes (stamp duty,
transfer tax, and minimum business tax, as well as a higher GCT threshold)
within the budget envelope. These tax cuts are feasible because of the
expanded tax base that has been achieved through commendable efforts in
both tax policy and revenue administration. Overall, these budget measures
are expected to lower the cost of doing business, reduce informality and
increase economic activity.
“Looking ahead, accelerating public sector reforms, including a new
compensation framework that rewards performance and the rationalization of
the numbers of public bodies by prioritizing government functions, will
improve public service delivery. This will further reduce the wage bill and
release resources for social and growth-enhancing outlays.
“Swiftly and forcefully addressing the shortcomings in the governance of
public bodies—including those identified in the Auditor General’s report on
Petrojam—is critical to enhance transparency and accountability, reduce the
scope for corruption, bolster trust in public institutions, and protect
public funds.
“The team welcomes the government’s proactive steps to strengthen domestic
policy institutions in preparation for exit from Fund financial support
later this year. The planned fiscal council, policy framework for natural
disaster risks financing, macro-fiscal capacity building at the Ministry of
Finance and the Public Service, and enshrining central bank operational
independence constitute key pillars.
“We also applaud the BOJ’s innovative public engagement on the importance
of stable and predictable inflation. Further monetary loosening is
warranted to restore inflation to the target range of 4–6 percent,
including improving monetary transmission, while monitoring developments in
oil prices, global financial conditions, and domestic factors. Maintaining
a market-determined exchange rate with BOJ’s FX sales limited to episodes
of disorderly market conditions is necessary for the shift to full-fledged
inflation targeting.
“Building on the recent FSAP recommendations, the authorities are working
towards strengthening the financial sector’s oversight capacity, risk-based
and consolidated supervision, implementing measures to further develop the
FX and debt markets, and improving access to finance for businesses and
households.
“During the visit, the IMF team met with Prime Minister Andrew Holness,
Minister of Finance and the Public Service Dr. Nigel Clarke, Minister of
Energy, Science and Technology Fayval Williams, Bank of Jamaica Governor
Brian Wynter, Financial Secretary Darlene Morrison, Planning Institute
Director General Dr. Wayne Henry, senior government officials, as well as
members of the private sector, labor unions, and the Opposition.
“We would like to thank the Jamaican authorities for their continued
hospitality and candid discussions.”
