IMF concludes visit to Jamaica to discuss progress of economic program

IMF concludes visit to Jamaica to discuss progress of economic program

KINGSTON, Jamaica — An International Monetary Fund (IMF) staff team led by Uma Ramakrishnan visited Kingston from June 12–16, 2017, to take stock of progress on Jamaica’s economic reform program supported by the IMF’s precautionary stand-by arrangement (SBA). This was an interim short visit with no associated board discussion; the second review under the SBA is planned for September, in line with the semi-annual review schedule.

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At the end of the visit, Ramakrishnan issued the following statement:

“Strong program implementation continues, although weather swings are taking a toll on growth. Drought conditions adversely impacted agriculture in the second half of FY2016/17, and the recent flooding may further impact growth in 2017/18. The unemployment rate, while declining, remains high. Inflation is modest, and international reserves are above the program target, supported by a low current account deficit.

“Fiscal performance in 2016/17 was commendable, with the central government’s primary surplus in excess of 7 percent of GDP for the fourth consecutive year. Corporate and personal income taxes over-performed relative to the budget, partly reflecting dividends from reforms in tax and revenue administration over the past few years. The 2017/18 budget targets a primary surplus of 7 percent of GDP, with increased budget allocation to social and growth-enhancing capital spending.

“Staff emphasized the need to anchor the upcoming public sector wage negotiations on a comprehensive and forward-looking compensation framework. Prioritizing social and infrastructure spending — including by containing the wage bill and improving public service delivery — is critical to support growth. In this context, the new pension bill — which awaits Senate approval — presents an opportunity to implement the planned early retirement program (ERP). The ERP will require careful calibration to achieve sustainable long-term gains that offset the program’s short-term costs, and safeguards to mitigate the risk of reversal of these gains.

“The BOJ’s planned move towards a transparent and more market-based exchange rate pricing mechanism via foreign exchange auctions will improve price discovery in the foreign exchange market.

“IMF staff also discussed progress in institutional reforms, including those related to the public bodies, the crisis resolution framework, the BOJ Act, the mitigation of risks to the security dealers’ sector, and the development of the domestic bond market.

“The IMF team met with Prime Minister Andrew Holness, Finance Minister Audley Shaw, Bank of Jamaica Governor Brian Wynter, State Minister Fayval Williams, State Minister Rudyard Spencer, Ambassador Nigel Clarke, Acting Financial Secretary Darlene Morrison, Planning Institute Director General, Wayne Henry, senior government officials, as well as members of the private sector, labor unions and civil society.”

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