Jamaica on target to complete first year of IMF programme
McPherse Thompson, Assistant Business Editor
Jamaica is on target to pass the first year of its economic support programme with the International Monetary Fund (IMF), having met key targets such as the net international reserves (NIR) and the primary balance along with structural adjustments executed through Parliament, co-chairman of the Economic Programme Oversight Committee (EPOC), Richard Byles, said.
An IMF team is currently in Jamaica undertaking the fourth-quarter review, and according to Byles, "I think the way is clear" for the mission "to make a positive recommendation to their board on Jamaica's first year of the agreement."
"I think that because it's the end of our first year under the agreement, it may be appropriate for me to just look at some of the numbers of this year versus a year ago, just to give a sense of the improvement that has occurred in the economy," the EPOC chairman told a news briefing at Sagicor Life Jamaica in New Kingston, where he released the 12th communiqué issued by the non-public-sector members of the committee yesterday.
He said the primary balance increased by nearly $40 billion in the last fiscal year, moving to $111.7 billion, surpassing the targeted $111.5 billion, which is equivalent to 7.5 per cent of gross domestic product, under the IMF's Extended Fund Facility. The NIR increased by US$426 million, reaching US$1.31 billion, exceeding the target of US$1.05 million. Tax revenues grew by $24 billion to $343.8 billion, falling short of the target of $360.5 billion.
Byles noted that the fiscal balance comprised all of government revenue, minus operating expenses, minus interest costs, minus the capital budget, "and they managed to come out with a surplus of $1.7 billion. So the central government is essentially paying from revenues for all of central government expenses, and this a new development for the economy, and a welcome one I should say."
Inflation turned out to be 8.1 per cent "which was pretty low when considering that the minimum wage was increased, bus fares were increased" and the depreciation in the value of the Jamaican dollar was 11 per cent over the period.
Another interesting economic metric is that of the current account as a percentage of gross domestic product (GDP), he said, noting that at the end of fiscal year 2012-2013 it was 12.8 per cent, while at the end of fiscal year 2013-2014 it was 9.6 per cent. "So there is a considerable improvement in the current account-to-GDP ratio," he added.
The debt-to-GDP ratio fell from 145.3 per cent to 139.2 per cent. "So, some improvement, but as you can see we still have a far way to go to get to the 60 per cent," Byles said.
Data published by the Statistical Institute of Jamaica show that, when compared with January 2013, at the end of January 2014 the unemployment rate fell from 14.5 per cent to 13.4 per cent.
Referring to the Jamaica Chamber of Commerce index of business confidence, which showed an increase to 117.8 from 95 a year ago, the EPOC co-chairman said the index is trending in the same direction as many of the macroeconomic figures.
At the EPOC meeting a few days ago, he said, Minister of Finance and Planning Dr Peter Phillips was invited and agreed with them that among the primary objectives during the current fiscal year is the need to significantly improve tax compliance, "so that next year he's not coming back to the same taxpayers asking for more taxes."
Foundation for growth
They also agreed that the route to sustained economic growth has to be through continued fiscal consolidation. "In other words, what we are doing on the fiscal side to create surpluses to pay down the debt is an important part of creating a foundation for sustained economic growth," said Byles.
In addition, they agreed there was an urgent need to transform certain sections of the public sector, particularly those that deal with growth. "So any area of the public sector that touches the private sector in respect of growth initiatives, we need to identify those and begin very quickly to hasten their efficient improvement," he said.
The minister also informed EPOC that Cabinet has appointed a subcommittee to monitor, coordinate and drive the implementation of all major government growth projects.
While noting the significance of Jamaica's achievement during the past year, Byles said the economic situation remains precarious. "We just want a bad hurricane this year and we are in trouble, that's how precarious the economy is," he said.