'Without jobs, IMF programme will be undermined'
McPherse Thompson, Assistant Business Editor
There is a risk that societal support for the reform effort under the International Monetary Fund (IMF) programme will be undermined unless there is higher economic growth and job creation, an official of the organisation has warned.
To that end, the mission chief of the IMF to Jamaica, Dr Jan Kees Martijn, said broad social support for the reform programme needs to be maintained.
"The recovery remains tentative and the social costs of the adjustment effort have been substantial," Martijn told a press briefing at the Ministry of Finance's office in Kingston, following the staff mission's discussions on an Article IV consultation and fourth review of Jamaica's IMF-supported programme under the Extended Fund Facility.
"Investor confidence remains hesitant and higher growth and job creation are needed. Without these, there is a risk that societal support for the reform effort will be undermined. In this context, an ongoing emphasis on safeguarding social spending and increasing the social safety net is critical," he said.
REFORM AGENDA CHALLENGING
Martijn said "the reform agenda is challenging. A reorientation of fiscal policy remains at the core of the adjustment effort. The immediate weakness of fiscal revenues calls for the prompt and steadfast implementation of the action plan to improve tax collection."
He added that "public-sector reform needs to be stepped up without delay; a lasting fiscal consolidation that supports rather than hinders private-sector growth will require a smaller and more efficient public service."
In addition, he said "the growth impact of scarce public investment needs to be leveraged through structured investment planning, prioritisation and budgeting. Fiscal risks need to be carefully managed through tackling public-sector inefficiencies, lessening unfunded pension obligations, commercialising loss-making public enterprises, and putting in place well-structured public-private partnerships."
Martijn said "determined action to boost growth is a must. Removing red tape and boosting competitiveness will bolster growth and job creation".
The return to a more flexible exchange rate has resulted in important improvements in price competitiveness, and should be maintained, said the mission chief.
While noting that confidence in the coherence of policies will be critical for boosting investor sentiment, the IMF official said "private investment will only return if efforts are also focused on removing pervasive red tape and bureaucracy".
Containing inflationary pressures in face of exchange rate depreciation, and restoring an adequate level of reserves, necessitate a cautious monetary policy stance, Dr Martijn said.
"This, however, needs to be weighed against the risk of excessively tight liquidity conditions undermining investment and creating risks in the financial system. The recent creation of a standing liquidity window and the expansion of repo instruments are welcome steps, but their design should be improved," he added.