IMF Staff Concludes Visit to Jamaica

IMF News, June 15, 2018

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Record high employment levels and an 11-year low unemployment rate.
Significantly lower poverty rate, particularly rural poverty.
Inflation fell below the Bank of Jamaica’s (BOJ) target range of 4–6 percent during March and April 2018, helped by rapid deceleration in food and electricity prices.
Real GDP growth in FY2017/18 was estimated to be just below one percent.
Gross international reserves reached US$3.7 billion at end-May, or about 25 weeks of imports.
The current account deficit jumped to 5.2 percent of GDP in FY17/18 due to several one-off factors, including imports of capital equipment for mining and security, as well as higher global oil prices.

The central government primary surplus was 7.7 percent of GDP in FY2017/18, exceeding the budget target by 0.7 percentage points of GDP.
Sustained fiscal discipline demonstrated in a primary surplus exceeding 7 percent of GDP since 2013/14.
Public debt reduced to about 104 percent of GDP at end-March 2018, down from 145 percent 5 years ago.
Primary surplus outperformance partly owed to buoyant taxes and some under-performance in capital spending.

Wage negotiations settled with union groups representing about 70 percent of central government employees; negotiations continuing with remaining groups, including the police and nurses.
IMF recommendation: use the window of the 4-year wage agreement to overhaul the public sector’s compensation structure.
- Specific objectives include streamlining the vast and inequitable allowance structure, retaining skills while rewarding performance, and prioritizing government functions.
- Foreseen outcome: reduction in the workforce from refocusing public sector activities, supporting a durable reduction in the wage bill and freeing budget resources for social priorities, combating crime, and growth-enhancing capital spending.

IMF supports recent policy rate cuts and the BOJ’s resolve to cut interest rates further, if needed, to steer inflation towards the mid-point of the central bank’s target range.
The IMF team welcomes progress being made to revise the BOJ Act, which will be critical to the full shift to inflation targeting, and the related work to strengthen central bank communications.

The ongoing Financial Sector Assessment Program (FSAP) by the IMF for Jamaica is expected to inform financial sector reforms going forward, including on bank supervision and non-bank regulations.
The IMF welcomes the authorities’ initiative to further entrench fiscal sustainability, including by developing an independent fiscal council and a public financial management strategy for natural disasters.

An IMF staff team led by Uma Ramakrishnan visited Kingston from June 11 to 15, 2018, to take stock of progress on Jamaica’s economic reform program supported by the IMF’s precautionary Stand-By Arrangement (SBA).
The mission issued an end-of-mission statement; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
During the visit, the team met with Prime Minister Andrew Holness; Minister of Finance and the Public Service Dr. Nigel Clarke; Minister Without Portfolio in the Ministry of Finance and the Public Service Fayval Williams; Bank of Jamaica Governor Brian Wynter; Acting Financial Secretary Darlene Morrison; Planning Institute Director General Dr. Wayne Henry; senior government officials; members of the private sector; labor unions; and the opposition.
Quote highlighted by the mission: "Important to use the window of the 4-year wage agreement to overhaul the public sector’s compensation structure." — IMF’s RAMAKRISHNAN

IMF Staff Concludes Visit to Jamaica — June 15, 2018