IMF hails Jamaica while disbursing US$80 million

The International Monetary Fund (IMF) has hailed Jamaica while providing US$80 million following the island’s successfull completion of the last two performance reviews under the US$948.1 million Extended Fund Facility (EEF).

The Washington-based multilateral lending agency said the latest disbursement brings to US$748.2 million provided to Jamaica since the agreement was signed in 2013.

The fund noted that, since May 2013, Jamaica’s implementation of the economic reform programme supported by the EFF has been exceptional by international standards.

“After three years of difficult economic reforms, inflation is at historical lows, the current account deficit has more than halved, net international reserves have doubled, and access to domestic and international financial markets has been restored, supported by upgrades in credit ratings and historically high business confidence indicators,” the IMF noted.

It said that comprehensive reforms in tax policy and administration have been and continue to be undertaken, while strict adherence to fiscal discipline, together with a PetroCaribe debt buyback, has helped to place the country’s debt on a downward trajectory.

The IMF said financial sector resilience has also been strengthened, and supply-side growth constraints have been eased, this despite general elections in February of this year, which resulted in a change in government.

“The new Government remains committed to continuing reforms under the programme, with a focus on maintaining fiscal discipline while achieving equitable growth through increased capital spending and the strengthening of the social safety net,” the IMF noted.

The fund’s Deputy Managing Director, Mitsuhiro Furusawa, said Jamaica’s economic reform programme, supported by the fund’s EFF, has made major strides in restoring macroeconomic stability, pursuing fiscal consolidation, reducing public debt and undertaking significant tax policy reforms, building financial sector resilience, and tackling structural issues.

“Business confidence is at an all-time high, while inflation and the current account deficit have been significantly reduced. The domestic bond market has reopened after the 2013 debt exchange, and private credit growth is recovering” he noted.

He said the new administration is committed to continued fiscal discipline and that the phased personal income tax reform launched with the 2016/17 budget “is a bold step to shift the tax system from direct to indirect taxation”.

He elaborated that, “Proper execution of this reform is critical to ensure revenue neutrality and safeguard the revenue base. Strengthening and better targeting conditional cash transfers will help mitigate the impact of the reform on the low-income population.”

However, Furusawa said concrete reforms are needed to sustainably reduce the Government’s wage bill, which continues to crowd out priority social and infrastructure spending.

“Actions should be expedited to divest and outsource certain Government services and implement the human resource management system. Jamaica’s growth remains weak, and unemployment, while declining, is still high. Further structural reforms to boost growth and employment should focus on facilitating private sector development by expanding financial access and reducing financing cost, lowering energy cost, maintaining external competitiveness, reducing tax compliance costs, and improving public sector resource allocation,” the senior IMF official added.