The International Monetary Fund (IMF) says Jamaica’s implementation of the US$1.66 billion Stand-By Arrangement (SBA) remains strong, five years after the country began the task of reforming its economy.
The IMF executive board, which has completed the fourth review under the SBA, said, nonetheless, structural impediments need to be quickly addressed to foster private capital formation and accelerate growth and job creation. It also called on the government to ensure that the public sector wage bill is placed on a downward path.
Modernize the BOJ
It said modernizing the Bank of Jamaica, (BoJ), the island’s central bank will help facilitate the needed move to full-fledged inflation targeting.
IMF Deputy Managing Director, Tao Zhang, who served as the acting chair of the board review meeting, said Jamaican authorities continue their impressive track record under the SBA.
He said macroeconomic stability is entrenched, with reduced public debt and improving social and unemployment indicators, growth remains subdued.
Zhang said that the BoJ remains committed to maintaining inflation within the 4-6 per cent target range over the medium term.
He said 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.
Suppress public-sector wage bill .
The IMF official said 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,” he said.
Zhang said 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,” Zhang said.