WASHINGTON, USA -- On Friday, the executive board of the International Monetary Fund (IMF) completed the combined 11th and 12th reviews under the extended arrangement under the extended fund facility (EFF) for Jamaica. The completion of the reviews enabled the disbursement of an amount equivalent to SDR 56.64 million (about US$80 million) bringing the total disbursements under the arrangement to the equivalent of SDR 530.42 million (about US$748.2 million).
The executive board approved the EFF arrangement for four years and a total equivalent to SDR 615.38 million (about US$948.1 million), the equivalent of 225 percent of Jamaica’s quota in the IMF at the time of approval of the arrangement.
According to the IMF, since May 2013, Jamaica’s implementation of the economic reform program 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.
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 have helped place debt on a downward trajectory. Financial sector resilience has been strengthened and supply-side growth constraints have been eased.
Elections in February 2016 resulted in a change in government. The new government remains committed to continuing reforms under the program, with a focus on maintaining fiscal discipline while achieving equitable growth through increased capital spending and the strengthening of the social safety net.
Following the executive board's discussion on Friday, Mitsuhiro Furusawa, deputy managing director and acting chair, issued the following statement:
“Jamaica’s economic reform program supported by the Fund’s Extended Fund Facility 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.
“The new administration is committed to continued fiscal discipline. The phased personal income tax reform launched with the FY2016/17 budget is a bold step to shift the tax system from direct to indirect taxation. 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.
“Concrete reforms are needed to sustainably reduce the government 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.”