IMF Staff Concludes Visit to Jamaica to Discuss Progress of Economic Program

The International Monetary Fund (IMF) recently concluded its visit to Jamaica and announced, “all quantitative performance criteria and structural benchmarks as at June 2017 were met.” The IMF noted, “the Jamaican economy is rebounding, despite weather swings” and the passing of the pension bill and public sector wage negotiations are crucial for “budgetary certainty and fiscal sustainability”.

The IMF team led by Dr. Uma Ramakrishan concludes its 10-day visit which started on September 5th, 2017, today September 15th, 2017. The statement issued by Uma Ramakrishan, highlighted the country’s economic program continues to produce strong results, supporting high confidence and growing job creation. This was evident as she noted, “the Jamaican economy is rebounding, despite the impact of weather swings in 2017. Growth has been positive for 9 consecutive quarters, with strong performances especially in tourism, construction, and manufacturing. Unemployment reached 12.2 percent in April 2017, a 7-year low, along with a sustained expansion in the labor force. For FY17/18, economic activity is projected to expand by 1.6 percent, slightly lower than anticipated, as flooding adversely impacted agriculture. Over the medium-term, economic expansion is expected to be around 2½-3 percent, as sustained reforms yield higher investment and productivity dividends.”

In her teams’ assessment of the performance of the Jamaican economy, Dr. Ramakrishan noted, “The central government’s primary balance surplus exceeded the program target by a healthy margin, mainly from buoyant corporate income tax. Non-borrowed international reserves also over-performed, and inflation is anchored within the Bank of Jamaica’s target range of 4–6 percent.”

There was a consensus regarding the acceleration of public sector wages negotiations as delays may pose significant risks and uncertainty to the fiscal accounts of the government. “It was also acknowledged that wage negotiations should be anchored on a forward-looking medium-term compensation framework to sustainably reduce the wage bill and release resources for the much needed social and growth-enhancing spending. Going forward, it is important to rethink the extensive and inequitable system of allowances and the overall pay structure in the public sector. More fundamentally, reforms to a large and inefficient public sector cannot be delayed any further. Achieving greater efficiency requires a scale back of the roles, responsibilities, and overall size of the public sector. Strengthening the procurement process would also ensure a timely execution of capital projects,” she indicated.

The outcome of the 10 day visit led to a preliminary agreement on a set of policies aimed at completing the second review under the SBA. Consideration by the IMF’s Executive Board is tentatively scheduled for October 2017. The statement noted, “Upon approval, an additional SDR 126 million (about US$180 million) will be made available for Jamaica, bringing the total accessible credit to about US$790 million. The Jamaican authorities continue to view the SBA as precautionary, and use it as an insurance policy against unforeseen external economic shocks beyond Jamaica’s control.”

Lastly, Dr. Ramakrishan stated that, “Major institutional reforms in the financial sector are underway. In addition to the resolution regime for financial institutions, revisions to the BOJ Act are under consideration to crystalize the central bank’s mandate around price stability, along with a governance framework and balance sheet strength that support that mandate.”