IMF team visited Kingston to take stock of progress on Jamaica’s economic reform programme
An International Monetary Fund staff team led by Uma Ramakrishnan visited Kingston from June 11th to 15th to take stock of progress on Jamaica’s economic reform programme, supported by the IMF’s precautionary Stand-By Arrangement.
- Economic progress is reflected in high employment levels, an 11-year low unemployment rate, and significantly lower poverty rate
- 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
- Important to use the window of the 4-year wage agreement to overhaul the public sector’s compensation structure
At the end of the visit, Ms. Ramakrishnan issued the following statement:
“Record high employment levels, an 11-year low unemployment rate, and significantly lower poverty rate—particularly rural poverty—have underpinned the Jamaican economy. Rapid deceleration in food and electricity prices contributed to inflation falling below the Bank of Jamaica’s (BOJ) target range of 4–6 percent during March and April 2018. Gross international reserves reached US$3.7 billion at end-May, or about 25 weeks of imports, even as 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. However, weather swings took a toll on growth in FY2017/18, estimated to be just below one percent.
“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, owing to buoyant taxes and some under-performance in capital spending. The sustained fiscal discipline—demonstrated in a primary surplus exceeding 7 percent of GDP since 2013/14—has helped reduce public debt to about 104 percent of GDP at end-March 2018, down from 145 percent 5 years ago.
“Wage negotiations have been settled with union groups representing about 70 percent of central government employees, and every effort is being made by the authorities to reach agreement with the remaining groups, including the police and nurses, to limit budget uncertainty. The IMF team noted that the 4-year wage agreement provides a window of opportunity to overhaul the public sector’s compensation structure, including by streamlining the vast and inequitable allowance structure, retaining skills while rewarding performance, and prioritizing government functions. The resulting reduction in the workforce from this refocusing of the public sector’s activities will support a durable reduction in the wage bill and help ensure budget resources can be freed up to fund social priorities, combatting crime, and pursuing growth-enhancing capital spending.
“We support the 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 the 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.
“We also welcome the authorities’ initiative to further entrench fiscal sustainability, including by developing an independent fiscal council and a public financial management strategy for natural disasters.
“The ongoing Financial Sector Assessment Program by the IMF for Jamaica is expected to inform financial sector reforms going forward, including on bank supervision and non-bank regulations.
“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, as well as members of the private sector, labour unions and the opposition.
“We would like to thank the Jamaican authorities for their continued hospitality and frank discussions.”