Bold reforms still needed in Jamaica – IMF
The Andrew Holness-led Government is working closely with the International Monetary Fund (IMF) and other international partners to tackle key roadblocks to development and help expand the private sector.
In that regard, among the key reforms being dealt with is increasing access to finance by increasing banking-sector competition and reforming financial-sector taxation, according to the June edition of the online magazine, IMF Survey, which publishes news, views and analysis from the fund.
The Jamaican Government and the IMF are also working towards downsizing the public sector, through improving efficiency and reallocating public functions back to the private sector, as well as cutting red tape and unnecessary 'gatekeeping' at all levels of government to aid the business climate and strengthen productivity and competitiveness.
IMF Survey, in what it describes as its 'Economic Health Check' on Jamaica, said reforms also include implementing labour-market reforms that strengthen the link between pay and performance and increase labour-market dynamism.
Noting that crime was among the major obstacles to Jamaica's growth and job creation, the report said the fund and government were also working towards reducing crime and tackling both its economic and broader social ramifications.
"These measures will take time to bear fruit," said the report. "But they can only take place in an environment of fiscal discipline and economic stability. Despite the difficult road ahead, Jamaica can rise to the challenge and seize the moment," it added.
The report said that after several decades of low growth and rising public debt, Jamaica has made significant progress in restoring economic stability, "thanks to strong policies and programme ownership".
According to the Fund, the reform programme - supported by a four-year IMF loan approved in 2013 - "has been a turning point for the Jamaican economy and a case study in ownership and collaboration".
IMF Survey report said though the economic recovery continues, growth, which is projected at 1.7 per cent in fiscal year 2016/17, remains weak.
"The Government will, therefore, need to implement bold structural reforms to unleash Jamaica's potential," it said.
Sceptics regarded the IMF programme's challenging targets - including a primary balance of 7.5 per cent of gross domestic product (GDP) at the time, and relaxed in December 2015 to seven per cent of GDP for fiscal year 2016/17 - as unattainable, said the Survey report, noting that Jamaica's patchy track record of reform did not help.
"But implementation has been extraordinary - over 95 per cent of programme conditions were met. The creation of the Economic Programme Oversight Committee - a civil-society group made up of representatives from the private sector, public sector, and civil society, a first in an IMF programme - has ensured strong programme ownership. The goal was to build recognition of the challenges, keep an open channel of communication with both the IMF and the Government, and hold all sides accountable for achieving the programme's commitments," the magazine said.
IMF Survey noted that, in February 2016, a new Jamaica Labour Party Government took office. With broad public support for the IMF programme already ensured, there was never any question of the commitment to continuing the economic reforms, it added.
"Jamaica is not out of the woods yet. Despite the impressive progress on the reform front, growth remains unacceptably low and unemployment is far too high," the magazine said.
"The obstacles to Jamaica's growth and job creation are numerous and severe," it said, enumerating the key ones as crime, the cost and availability of credit, tax-compliance costs, unreliable and expensive electricity, and a large informal economy.
"The large size of the public sector has also stifled private-sector dynamism and places too much emphasis on government as the engine of growth and employment," IMF Survey said.
In a release last week on the IMF's Article IV Consultation with Jamaica, executive directors noted that the monetary stance is broadly appropriate, and encouraged the central bank to continue to focus on price stability.
They stressed the need to strengthen central bank autonomy and improve monetary transmission.
"In this context, the authorities should continue to refine monetary operations and reduce the high spread in banks' interest rates by increasing banking-sector competition and reforming financial-sector taxation," they said.
Directors also emphasised the importance of continued exchange rate flexibility.
The IMF executive directors welcomed the progress in enhancing financial-sector resilience. They concurred that the financial sector should be strengthened, through further retail-repo reforms and enhanced financial-sector supervision and crisis management, including establishing a legal framework for the resolution of banks and securities dealers.
They also highlighted the importance of promoting further development of the domestic debt market.
Directors stressed that continued structural reforms are needed to boost growth and employment. They highlighted, in particular, the need to reduce energy costs, increase access to finance, enhance public-sector efficiency, expedite labour-market reforms, and continue to improve the overall business environment to attract private investment.