Reduce bureaucracy to make business friendlier - IMF
A team which undertook the sixth review of Jamaica's economic support programme with the International Monetary Fund (IMF) has reemphasised the need for the government to reduce bureaucracy to create a more business-friendly public sector.
While a new system is now in place to allow all parish councils to track the approval of construction permits, for example, "work is still required ... to streamline the process for construction permits," IMF mission chief to Jamaica, Dr Jan Kees Martijn, said.
Addressing a press briefing at the Ministry of Finance and Planning in Kingston at the conclusion of the review last Friday, Dr Martijn said "the programme is on track and policy implementation remains strong," and that all programme targets, through end-September, were met. He added that Jamaica's economic outlook is improving.
"The critical challenge ahead will be to sustain the reform momentum and the strong fiscal position, with the understanding that it takes time for the efforts and sacrifices to generate the expected benefits," he said.
Apart from improving the business climate, Martijn said wide-ranging efforts will be needed to strengthen social protection by supporting people aiming to move from welfare to work, and maintaining social spending above the programme floor.
The authorities will also need to maintain the primary surplus of central government at 7.5 per cent of gross domestic product, in the 2015-16 fiscal year, by building a stronger tax administration and restraining the wage bill through a public-sector transformation that raises government efficiency.
In addition, the government will need to reinforce the legal and regulatory framework for the financial sector by putting the securities-dealers sector on a more sound footing and implementing the newly adopted Banking Services Act.
Finance and Planning Minister, Dr Peter Phillips, addressing the same briefing, said macroeconomic indicators continue to trend in line with the programme's expectations, noting that growth dynamic in the July to September quarter would have been affected by drought conditions and health concerns associated with the chikungunya virus.
For the current fiscal year, the current account balance of payments deficit is expected to improve to 6.3 per cent of gross domestic product (GDP), following a sharper-than-anticipated contraction in the deficit for the 2013-14 fiscal year to 8.4 per cent of GDP, he said.
Dr Phillips said the improved performance of the external accounts is driven by a reduction across all categories of imports, noting particularly the effect of the decline in oil prices. In addition, there have been increases in tourism earnings and remittance inflows.
GDP expanded faster than expected in the June quarter, by 1.8 per cent, led by a robust performance in agriculture. The outlook for the current fiscal year is likely to be revised downward, reflecting the sharp decline in agriculture in the September quarter.
However, a sharp rebound is expected in agriculture in the second half of the year, which will minimise this impact, Dr Phillips said, noting that already there are signs of recovery in domestic crop production on account of increased levels of rainfall.
The revision in growth forecast will also be influenced by the impact on productivity of current health concerns, particularly the chikungunya effect", which we have not been able to measure, but which we think is there," the finance minister said.
Martijn said Jamaica's economic-transformation programme offers a path to vibrant, sustained growth and job creation. "The government's programme is appropriately centred on wide-ranging supply side reforms and a rapid reduction in public debt to support private-sector growth. Multi-year fiscal consolidation, based on a clear anchor, the primary surplus target, is integral to this effort," he said.
The Fund mission reached preliminary understandings with the authorities on economic policies that will support growth and employment in the months and years ahead," Martijn said.
The IMF's executive board is expected to consider the sixth review of Jamaica's programme in December.