Step up reforms to boost growth, employment – IMF
The International Monetary Fund (IMF) has again commended the Government on its macroeconomic performance under the four-year extended fund facility, but is urging it to step up the pace of reform to boost growth and employment.
The executive board, which met on Monday and approved the seventh review of Jamaica's economic performance under the programme, said bold efforts are needed to reform the energy sector, improve the business climate and advance investment in critical infrastructure.
Completion of the review enables an immediate purchase of an amount equivalent to SDR 28.32 million (about US$39 million).
Deputy managing director and acting chair of the IMF, Mitsuhiro Furusawa, said the Jamaican authorities' commitment to the programme remained strong.
"Programme performance is on track and all quantitative performance targets for end-December were met," he said, adding that structural reforms have progressed broadly on schedule.
"Macroeconomic performance continues to be good and economic confidence has reached a two-year peak. The decline in oil prices should help lower inflation expectations and boost demand," Furusawa said .
"Still, stepping up the pace of reforms is essential to boost growth and employment," he said.
The IMF deputy managing director said, "the budget for 2015/16 demonstrates Jamaica's continued fiscal discipline and will help keep public debt on a sustainable path."
Furusawa said that maintaining the momentum for fiscal consolidation, over the medium term, requires boosting revenue and improving public sector efficiency.
"This involves strengthening customs and tax administration, and further broadening the tax base. It is also essential to improve public financial management, accelerate the reform of the public sector and contain public sector wage costs," he said.
"Buttressing the financial sector hinges on meeting the key milestones for reforming the retail-repo sector. Completing the transition of the retail-repo businesses to a trust-based framework requires careful management. Implementing the Banking Services Act will be a necessary step to improve financial sector stability further," Furusawa added.
According to the memorandum of economic and financial policies submitted to the IMF in December 2014, the government has committed to establishing a distinct treatment for retail-repo clients in the legal and regulatory framework in order to protect their interests prior to, and in the event of, the insolvency of a securities dealer.
That will entail establishing a trust to hold the underlying securities on their behalf during the term of the retail repo.
The legal and regulatory framework will comprise the standardised legal documentation for the retail-repo transactions, including a master retail-repurchase agreement and trust deed.
The trust arrangement is intended to ensure that funds and securities flow in accordance with the terms of the retail-repo agreement, and the trust will be responsible for the custody of the securities underlying retail repo transactions.
A key function of the trust arrangement will be to ensure that the interests of each retail-repo client in the underlying securities are clearly and uniquely identified for the increased protection of clients, and also to ensure such securities would be held apart from the dealer's estate in the event of its insolvency.
The government said the transition of retail repos to the trust-based framework will be finalised by the end of June 2015, taking into account evolving market conditions and ensuring financial stability. As interim steps, the Government said it would start a pilot by the end of February 2015, and start the transition by mid-April 2015.