Jamaica's International Monetary Fund programme still on track
An International Monetary Fund (IMF) staff mission to Jamaica has again given the thumbs up to the Government's performance under the four-year extended fund facility, so far, again concluding that programme implementation remained strong.
New IMF chief to Jamaica, Uma Ramakrishnan, said the mission, which visited Jamaica during the period May 4 to 12, reached preliminary agreement with the authorities on a package of policies aimed at completing the eighth review.
Consideration by the IMF's executive board is tentatively scheduled for June 2015 and, on approval, Special Drawing Rights 28.32 million (about US$40 million) would be made available to Jamaica.
"Over the past two years, Jamaica has adopted ambitious policy changes that have laid the foundation for a gradual recovery of economic growth and employment. Although painful in the short run, these policies are now starting to bear fruit," Ramakrishnan told a press briefing at the Ministry of Finance and Planning offices in Kingston yesterday.
She said the economic outlook is improving and growth is expected to be about two per cent in 2015-16, supported by both domestic and global trends. The target is more ambitious than the Government's baseline growth projection of 1.6 per cent.
Ramakrishnan noted that inflation fell to four per cent in March 2015, the lowest in many years, reflecting lower fuel and electricity costs and moderating food prices. International reserves continue to increase, while debt has been put firmly on a downward trajectory.
"Business and consumer confidence are both growing rapidly. Strengthening confidence in Jamaica's economic policies is evidenced by the narrowing sovereign-bond spread, relative to the emerging market average," she said.
All of the IMF's quantitative performance targets, through end-March, were met, with the exception of the target for the primary surplus of the central government, which was narrowly missed as revenue came in lower than projected in 2014-15.
However, the primary surplus is still estimated at 7.5 per cent of gross domestic product (GDP), the central fiscal anchor of the programme.
Finance and Planning Minister Dr Peter Phillips noted that Jamaica's commitment to a high primary surplus target underpinned the primary objective of the economic reform programme, "which is to reduce the significant level of debt built up over the years".
In that regard, he said, "it is, therefore, important to note that the fiscal deficit is $3.6 billion better than target and this outturn supports our debt-reduction objective."
The debt-to-GDP ratio fell from 140.7 per cent, at the end of 2013-14, to 138.5 per cent, at the end of 2014-15, Phillips said.
Ramakrishnan said expenditures were broadly aligned with the reduced resource envelope, and the overall balance of the public sector was stronger than targeted under the programme.
"The budget for 2015-16, that was adopted by Parliament in March, aims for maintaining the primary surplus at 7.5 per cent of GDP for a third consecutive year. The budget offers room for additional spending, in particular on medication and medical supplies. Safeguards to achieve the primary surplus target include a revenue package, which is expected to yield J$10 billion, or 0.6 per cent of GDP, and ongoing reforms of the revenue administration," the mission chief said.
Ramakrishnan, who replaced Dr Jan Kees Martijn, who served as mission chief to Jamaica for the last three years, said. "the economic policies in the updated economic programme aim to support economic growth and job creation while maintaining prudent fiscal policies".
She added that sustaining the fiscal position, over the medium term, will require further steps to broaden the tax base and improve public-sector efficiency.
In addition, she said, "financial sector stability is being strengthened through progress in implementing the Banking Services Act, enhancing contingency planning and resolution frameworks, ongoing reforms in the securities dealers sector, and revamping depositor and investor protection".