IMF Reaches Staff-Level Agreement with Jamaica on the Third Reviews of the Precautionary and Liquidity Line (PLL) and the Resilience and Sustainability Facility (RSF) Arrangement

IMF News, June 28, 2024

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Published: June 28, 2024

Staff-level agreement and next steps

The IMF team and the Jamaican authorities reached a staff-level agreement on the completion of the third reviews of Jamaica’s Precautionary and Liquidity Line (PLL) and the Resilience and Sustainability Facility (RSF).
The IMF’s Executive Board is expected to consider these reviews in August.
Mission dates: the IMF team led by Mr. Esteban Vesperoni held meetings with the Jamaican authorities during June 24-28.

Macroeconomic assessment and recent performance

Policies supported the economy, reduced public debt and inflation, and strengthened the external position.
Growth has been strong, resulting in a record-low unemployment in the context of a strong cyclical position.
Inflation has returned to the central bank’s (BOJ) target band.
The BOJ continued to pursue a data-dependent approach to monetary policy decisions.
Public debt continues its strong downward trajectory.
International reserves reached a record-high level supported by the recovery of tourism.
The financial system remains well capitalized and liquid.

Outlook and risks

The outlook is positive but subject to downside risks.
Growth is expected to converge to potential and inflation to return close to the mid-point of the 4-6 percent target band in 2024 amid moderating commodity prices.
Identified global risks:
- tighter-than-expected global financial conditions;
- lower global growth and its impact on tourism and remittances;
- an intensification of geo-political conflicts that increase global commodity prices;
- natural disasters.

Fiscal and monetary policy commitments

The authorities remain committed to primary surpluses to reach a 60 percent debt-to-GDP ratio by FY2027/28, as prescribed by the country’s Fiscal Responsibility Law.
The FY2024/25 budget aims for a primary surplus consistent with this goal.
Monetary policy remains data dependent and focuses on safeguarding inflation convergence to the mid-point of the central bank’s target band.
The authorities continue to treat the PLL as precautionary.

PLL and RSF implementation and reforms completed

Under the Precautionary and Liquidity Line, authorities took steps to enhance the resolution of non-viable financial institutions and improve data adequacy.
Fiscal position contributed to further reduction of public debt and international reserves continued to increase over the last fiscal year, strengthening external buffers.
Under the Resilience and Sustainability Facility, completed reform measures include:
- quantitative analysis of climate related fiscal risks;
- steps to adopt fiscal measures to incentivize investment in renewables;
- establishment of reporting requirements for financial institutions to implement climate risks stress testing;
- establishment of a framework for green-bond issuance.
The completion of these RSF reforms makes available SDR191.45 million (about US$255 million) under the arrangement.

Climate, resilience, and financing implications

Advancing Jamaica’s agenda to accelerate the transition to renewables, increase resilience to climate change, enhance the climate focus in fiscal policy frameworks, and strengthen the management of climate risks by financial institutions can catalyze climate financing.
Expected channels for fostering growth include investments supporting energy efficiency, emissions reduction, and increased resilience to the effects of climate change.

Source: IMF press release — IMF Reaches Staff-Level Agreement with Jamaica on the Third Reviews of the Precautionary and Liquidity Line (PLL) and the Resilience and Sustainability Facility (RSF) Arrangement, June 28, 2024.