The International Monetary Fund (IMF) says Jamaica’s commitment to a US$1.68 billion Stand-By Arrangement (SBA) program remains strong more than four years after embarking on difficult economic reforms.
Performance on track
“Program performance is on track and macroeconomic stability is entrenched, with stronger fiscal and external positions, subdued inflation, and employment at historic highs,” said Tao Zhang, the IMF’s Deputy Managing Director.
“Nevertheless, vulnerability to weather-related shocks continues to pose important challenges to Jamaica’s growth performance. Against this backdrop, supply-side reforms, including enhancing resilience to weather swings, must be accelerated to deliver better growth and job outcomes, reduce poverty, and improve living standards, while sustaining macroeconomic stability,” he added.
Second review completed
On Monday, the IMF executive board completed the second review of the SBA indicating that while the commitment remains strong more than four years into the reform program, fiscal sustainability requires a continued reduction in the public wage bill, particularly as the government rethinks its role, responsibilities, and size of its workforce.
The Fund said Jamaica’s structural reforms are critical to build resilience and support inclusive growth.
The 36-month SBA with a total access of US$1.68 billion was approved by the IMF on November 11, 2016. The Washington-—based financial institution said the Jamaican authorities continue to view the SBA as precautionary, and to use it as an insurance policy against unforeseen external economic shocks that could lead to a balance of payments need.
Need to complete wage negotiations
Zhang said concluding the ongoing wage negotiations in Jamaica is necessary for budget certainty.
“More generally, fiscal sustainability requires a continued reduction in the public wage bill, particularly as the government rethinks its role, responsibilities, and size of its workforce. Overhauling the pay structure and reviewing the complex system of allowances are vital foundations to a modern public sector that can attract and retain talent.”
He said that the Jamaican authorities recognize reforms to the Bank of Jamaica Act, further enhancing the monetary policy toolkit, improving communications, and strengthening the central bank’s balance sheet are essential for moving toward inflation targeting.
The IMF official said that implementation of the resolution framework for financial institutions is critical for strengthening the financial sector’s resilience.