The Ministry of Finance confirmed last week that it has presented a conceptual proposal for the design of a fiscal rule to staff of the International Monetary Fund (IMF) in keeping with the August 31, 2013 deadline for its submission under the extended fund facility.
The design of a fiscal rule is among the structural benchmarks under institutional fiscal reforms agreed in the four-year loan programme.
According to the IMF agreement, the first programme year features fundamental structural reforms to entrench greater fiscal discipline and help prevent a return to deficit spending.
Strengthening fiscal institutions, improving public financial management, implementing tax policy reforms, and adopting a binding fiscal rule are all critical for the success of the programme, according to the IMF Country Report 13/126 on Jamaica.
The programme envisages the adoption of a binding fiscal rule to enhance fiscal transparency and lock in the gains of fiscal consolidation. The authorities agreed to design and adopt a legally binding fiscal rule to help ensure a sustainable fiscal balance.
The Jamaican Government had planned to present a first proposal to IMF staff by end-August 2013, and the rule is to be adopted and incorporated in the annual Budgets starting in fiscal year 2014-2015.
Going forward, the annual Budget should be guided by the new fiscal rule, which is expected to imply a pace of debt reduction that is at least as ambitious as the current programme projections.