EPOC bemoans continued lack of economic growth - Projections lowered to 0.7% for fiscal year
Jamaica has hit the macroeconomic targets it set out to achieve, but the expected rise in the levels of growth, which was a key objective of the reform programme, is still below target, Keith Duncan says.
The chairman of the Economic Programme Oversight Committee, EPOC, noted on Friday that when he had his first press conference three years ago, he had listed several factors that Jamaica must achieve to sustain economic growth – lowering the debt-to-GDP ratio to 96 per cent, maintaining a primary surplus of seven per cent, greater levels of non-borrowed Net International Reserves of about US$2.8 billion – saying then that achieving those targets would allow Jamaica the fiscal space to invest in infrastructure.
“I believe we have seen the results,” Duncan said at his latest press briefing on Friday.
“Debt to GDP is at 94 per cent, non-borrowed reserves is at about US$2.5 billion, and we have maintained 18 quarters of growth, albeit below the levels we want to see,” he said.
In his report on the sixth and final review of the precautionary standby agreement with the International Monetary Fund, conducted between September 9 and 19, Duncan said that based on the preliminary results for performance through the end of June, the Government of Jamaica has met the targets for the quantitative performance criteria and indicative targets.
The sixth review will be completed at a meeting of the IMF executive board scheduled for November. He said that the Government has met all 22 structural benchmarks for the November 2016 to September 2019 period, including eight macro-fiscal and 14 structural benchmarks for public sector transformation, public bodies, and public-sector reform.
There is only one structural benchmark currently remaining under the programme, namely the capping of the total stock of domestic arrears of seven public bodies at $6.4 billion, which is being met on a monthly basis. The standby arrangement will expire on November 8.
In reviewing the fiscal targets under what Duncan said is now Jamaica’s programme, which is no longer subject to review by the IMF, he said revenue and grants of $202.1 billion for the first four months of the current fiscal year exceeded the budgeted amount of $198.1 billion, while tax collections of $178.9 billion outperformed the budget by $3.8 billion.
Expenditures for the first four months of the fiscal year was $5.1 billion below budget. Of the amount, capital expenditure was $15.6 billion, $4.2 billion below budget. Duncan said the slower-than-programmed implementation of some capital projects, most notably the South Coast Highway improvement project, was responsible for the below-target performance.
As a result of the revenue and grants performance for the first four months of the fiscal year, the primary balance of $49.3 billion exceeded the $43.7 billion budget for April to July 2019.
As at September 26, 2019, the Net International Reserves stood at US$3.08 billion while non-borrowed reserves were projected at the end of September to close at US$2.76 billion or US$576.1 million above the target of US$2.18 billion.
He said that Jamaica’s macroeconomic indicators remain strong, but growth levels continue to hover below two per cent. Projections for the current fiscal year have been lowered to 0.7 per cent as a result of the announced closure of the Alpart alumina plant in St Elizabeth, the EPOC chairman said.
Duncan also noted that the micro, small, and medium sized-enterprise sector represents more than 50 per cent of Jamaica’s GDP but only receives 10.7 per cent of credit from the banking sector, adding that it is a fertile ground for inclusive growth.
However, he said that significant effort is being made by the private sector, the Bank of Jamaica, and the Government to address the access to finance issues that have plagued the sector.
Responding to queries about the provision of data to EPOC from the Bank of Jamaica and the Ministry of Finance in the post-IMF period, Duncan said, “We are absolutely comfortable. The minister has committed to providing marco-economic targets, policy commitments, and deliverables. “
“The same macro-economic framework, policy matrix, and plan will be given to EPOC going forward post-November to monitor these targets and deliverables at minimum for a year,” he said.
Duncan said that going forward, the composition of EPOC will remain the same except that there will not be a co-chairman, a post formerly occupied by the Bank of Jamaica governor.
He said the oversight body is expected to continue to receive data from the Ministry of Finance and the Bank of Jamaica as was done under the IMF programmes.