Hasten divestment of underused assets, IMF urges government
The International Monetary Fund (IMF) is urging the government to speed up its efforts to divest underutilised assets as part of the structural reforms to support a dynamic private sector that creates jobs.
In that regard, it has also suggested that efforts should be made to upgrade procurement procedures, ease the development approval process, and foster financial inclusion.
Prime Minister Andrew Holness announced in January this year that the government is committed to divesting more state assets in order to facilitate increased investments that yield greater levels of economic growth.
Addressing the Jamaica Stock Exchange regional investments and capital markets conference, Holness said there are several state entities with significant assets, which are "not generating much".
Among those he identified were the Urban Development Corporation and Factories Corporation of Jamaica, with combined assets of $100 billion.
The Fund's Deputy Managing Director Tao Zhang, in a statement following the executive board's completion of the second review under the standby arrangement for Jamaica on Monday, October 23, said the authorities' commitment to the programme remains strong more than four years after the country embarked on difficult economic reforms.
He said programme performance is on track and macroeconomic stability is entrenched, with stronger fiscal and external positions and subdued inflation.
Nevertheless, vulnerability to weather-related shocks continues to pose important challenges to Jamaica's growth performance, said Zhang.
Against that backdrop, supply-side reforms, including enhancing resilience to weather swings, must be accelerated to deliver better growth and job outcomes, reduce poverty, and improve living standards, while sustaining macroeconomic stability, said the IMF deputy managing director.
"Concluding the ongoing wage negotiations is necessary for budget certainty," he said. "More generally, fiscal sustainability requires a continued reduction in the public wage bill, particularly as the government rethinks its role, responsibilities, and size of its workforce."
The Fund has reiterated that overhauling the pay structure and reviewing the complex system of allowances are vital foundations to a modern public sector that can attract and retain talent.
In addition, a smaller public sector remains essential to create space for much-needed spending on health, education, social safety nets, public safety, and growth-enhancing capital projects.
Zhang said, "the authorities recognise that reforms to the Bank of Jamaica Act, further enhancing the monetary policy toolkit, improving communications, and strengthening the central bank's balance sheet are essential for moving towards inflation targeting. To this end, the authorities are committed to maintaining exchange rate flexibility and limiting foreign exchange interventions to smoothing excessive volatility."
The Fund also suggested that "implementation of the resolution framework for financial institutions is critical for strengthening the financial sector's resilience. Any changes to investment and foreign exchange limits of non-bank institutions should first carefully analyse growth and stability trade-offs and ensure that adequate supervisory capacity is in place."