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IMF says Jamaica needs to create more jobs

Published:Thursday | September 24, 2015 | 2:08 PMMcPherse Thompson

The International Monetary Fund (IMF) said Wednesday that Jamaica's macroeconomic fundamentals have continued to strengthen, but suggested that economic growth remained weak and unemployment needs to decrease further.

Among the macroeconomic fundamentals it pointed to was inflation, which it noted was at a historical low, and noted that the current account is improving, aided by declining oil prices.

Annual inflation at August was tracking at 3.5 per cent.

IMF Deputy Managing Director Min Zhu made the comments following the executive's board approval of the ninth review under Jamaica's economic support programme, as well as approval for disbursement of a further US$39.7 million to Jamaica under the four-year agreement.

The most recent data from the Statistical Institute of Jamaica show growth of just 0.4 per cent in the first quarter of 2015. The Planning Institute of Jamaica is estimating a 0.8 per cent growth for the second quarter ending June.

The unemployment rate is at 13.2 per cent, while a third of Jamaican youths have no jobs.

Min Zhu, who is also acting chair of the executive board, said the recent upgrade in the credit ratings following the US$2-billion international bond placement signalled improved investor confidence in Jamaica's reform programme. The bond financed a US$1.5-billion buyback of PetroCaribe debt.

"But growth remains weak and unemployment needs to decrease further," he said. "Sustained efforts in structural reforms, including by reducing energy costs, improving the business environment, and developing critical infrastructure should help boost investment and growth," he added.

As the IMF has said following quarterly reviews in the past, Min Zhu reiterated that the economic programme was on track and structural reforms had progressed broadly on schedule.

He noted that the recent PetroCaribe buyback of the debt it owed Venezuela for oil has lowered the ratio of public debt to gross domestic product, a trajectory that the ongoing fiscal consolidation should firmly maintain.

"Nonetheless, it is essential to move forward with public-sector reforms, including as regards public financial management, to improve the efficiency of government services," the deputy managing director said.

"It is also important to continue strengthening fiscal revenue by reforming customs and tax admi-nistration and broadening the tax base," he added.

Min Zhu said that "recent steps to loosen the monetary stance should support credit creation, while maintaining price stability".

In addition, he said, the com-pletion of the transition of the retail repo contracts to a trust-based framework represented a milestone in buttressing financial sector stability.