No room to adjust IMF targets
Not much has changed to find more room or fiscal space to warrant a further adjustment in the International Monetary Fund's (IMF) programme targets for Jamaica since it reduced the primary surplus target in December 2015, according to Mission Chief Dr Uma Ramakrishnan.
Asked in what way the programme could be adjusted to satisfy the Government's move to create meaningful jobs while sustainably growing the economy and reduce public debt, Ramakrishnan noted that at the time the IMF reduced the primary surplus target, it was done to accommodate more growth-enhancing capital spending.
The IMF changed the primary surplus target from 7.5 per cent of gross domestic product to 7.25 per cent for fiscal year 2015-16 and 7.0 per cent for fiscal year 2016-17.
"So in that sense, given the track record that has taken place in the course of this programme, and given the room created by the PetroCaribe debt buy-back we were able to create some space in the programme to accommodate growth-enhancing capital needs," she said.
"I think between then and now, not much has changed in terms of finding more room for adjusting the programme," the mission chief to Jamaica told Wednesday Business in an interview in Washington, DC recently.
The IMF's definition of fiscal space is the room in a government's budget that allows it to provide resources for a desired purpose without damaging the sustainability of its financial position or the sustainability of the economy.
Ramakrishnan said that "more broadly, I think where the growth and job creation has to come from, from a broader perspective, are structural reforms. There's a lot to do. There are deeply entrenched problems in the country. Access to finance has been repeated as one of the big problems. Public-sector transformation is another, and enhancing public-sector efficiency. And all of these are now new. I think everybody in Jamaica understands that these problems have to be resolved to raise the potential growth for the country."
She said that "addressing some of these problems will take time, and I think the effects from them will take even more time."
Ramakrishnan said "it's a not yet a turning point" and "it's taking longer than we all would like it to be. But I'm optimistic that the turn is happening and as long as it stays the course, and as long as the structural reforms continue and the fiscal consolidation continues, and the confidence increases, I do believe there is scope for raising the potential growth."
Asked about her perception of the programme with Jamaica going forward, the mission chief said: "I'm optimistic. We have the prime minister and the new Government's commitment to work with us to make this programme succeed and we are also in the same direction, trying our best to make this programme succeed."
She added: "But I think we all know what Jamaica needs: fiscal consolidation the need to reduce public debt and we are committed to helping Jamaica grow and reduce its public debt."
The Organisation for Economic Cooperation and Development defines fiscal consolidation as a policy aimed at reducing government deficits and debt accumulation.