IMF completes fourth review under the stand-by arrangement for Jamaica

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IMF Executive Board

WASHINGTON, USA — On Monday, the executive board of the International Monetary Fund (IMF) completed the fourth review of Jamaica’s performance under the program supported by the stand-by arrangement (SBA).

The 36-month SBA, with a total access of SDR 1,195.3 million (about US$1.66 billion), equivalent to 312 percent of Jamaica’s quota in the IMF, was approved by the IMF’s executive board on November 11, 2016. The Jamaican authorities continue to view the SBA as precautionary, an insurance policy against unforeseen economic shocks that could lead to a balance of payments need.

Following the executive board’s discussion on Monday, Tao Zhang, deputy managing director and acting chair, issued the following statement:

“The authorities continue their impressive track record under the Stand-By Arrangement. While macroeconomic stability is entrenched, with reduced public debt and improving social and unemployment indicators, growth remains subdued. Against this backdrop, supply-side reforms to facilitate private sector investment are needed to achieve higher, sustained growth and job creation.

“The Bank of Jamaica (BOJ) remains committed to maintaining inflation within the 4-6 percent target range over the medium term. The recent tabling in Parliament of legislation to upgrade the BOJ Act is an important step toward the eventual shift toward full-fledged inflation targeting. Maintaining exchange rate flexibility and limiting FX sales during periods of disorderly market conditions is necessary to support an inflation targeting framework. The authorities are also planning to accelerate FX market development and the building of technical capacity in monetary operations.

“The public-sector wage bill needs to be placed on a sustained downward path. Reduced wage outlays will allow the government to reprioritize public spending toward security, social assistance, and growth-enhancing capital expenditure. Achieving such a wage bill reduction will require a broad overhaul of the public compensation and allowance system and a reduction in the size of the government workforce.

“The financial sector should be further strengthened in line with the recommendations from the accompanying Financial Sector Stability Assessment. Priority should be placed on enhancing coordination, data collection, monitoring, and strengthening technical capacity of the financial regulators. Improving consolidated and risk-based supervision are important reform areas. Addressing impediments that constrain access to finance would help support private-sector investment.”

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