USA / JAMAICA – An International Monetary Fund (IMF) team led by Esteban Vesperoni held meetings in Kingston and carried out a virtual mission with the Jamaican authorities from January 8-18 to conduct the 2024 Article IV consultation and review the implementation of the authorities’ reforms under the PLL and the RSF (Press Release 23/57).
At the conclusion of the mission, Vesperoni issued the following statement:
“The IMF team and the Jamaican authorities reached staff-level agreement on the Second Reviews of the Precautionary and Liquidity Line (PLL) and the Resilience and Sustainability Facility (RSF). Both facilities were approved by the Executive Board in March 2023, with a combined access of SDR 1,301.86 million (about US$1,732 million). The agreement is subject to approval by the IMF executive board, which is expected to consider the reviews in February 2024. The completion of the review will make available SDR191.45 million (about US$255 million) under the RSF.
“Over the last years, Jamaica has successfully reduced public debt, anchored inflation, and strengthened its external position. It has built a strong track record of investing in institutions and prioritizing macroeconomic stability. This allowed Jamaica’s response to recent global shocks to be prudent, agile, and supportive of growth.
“The economy continued to recover in 2023. After two years of rapid post-pandemic recovery, GDP growth is projected at 1.7 percent in FY2023/24, with tourism well above pre-pandemic levels and unemployment falling to a record-low of 4.5 percent by mid-2023. Inflation is converging to the Bank of Jamaica’s target band, though it was recently impacted by an increase in transport prices, whose effects are expected to dissipate towards the end of the year. Projected strong tourism inflows are expected to result in a current account surplus for FY2023/24 supporting a sound international reserves position. The financial system is well capitalized and liquid, and the public debt continues to fall.
“The outlook points to sustained growth and inflation falling within the Bank of Jamaica’s target range amid sound external and fiscal positions and financial system stability. Nonetheless, global risks remain high. A rise in global risk aversion may increase financing costs and lower projected global growth, and regional conflicts could increase global commodity prices. Finally, climate-related events could weaken economic activity.
“The Jamaican authorities continue to implement sound macroeconomic policies, aided by sound policy frameworks. Supported by strong revenues and strict control of non-wage spending, a prudent fiscal stance continues to support a reduction in public debt, which is expected to reach 72 percent of GDP in FY2023/24 – the lowest in 25 years – well below pre-pandemic levels. The Bank of Jamaica has maintained an appropriately tight policy stance, and its data-dependent monetary policy is countering the inflationary impulse from a strong economic recovery, tight labor markets, and global commodity prices. This policy mix is placing Jamaica in a good position to respond to shocks, counteract inflationary pressures, and secure debt sustainability.
“They have made good progress in implementing their policy agenda under the Precautionary and Liquidity Line and the Resilience and Sustainability Facility. They have initiated reforms to enhance financial supervision and strengthen data adequacy, as well as to improve climate resilience, including the proposal to establish a natural disaster reserve fund.”
“Further improvements in policy frameworks are ongoing. The Fiscal Commission will become operational in FY2024/25, and will assess macroeconomic and fiscal forecasts and the consistency of the budget with fiscal rules. The wage bill reform eliminates distortions in public sector compensation, making it more transparent and instrumental to retain qualified civil servants. Proactive debt management continues to improve the public debt profile for the first time in history, Jamaica placed domestic-currency debt in international markets last November.
Progress continues with adoption of the Basel III framework, initiatives to expand the Bank of Jamaica’s supervisory perimeter, and enhanced consolidated supervision. Going forward, a careful management of the wage bill will be important to avoid crowding out other priorities, improvements in public finance management can increase the quality of public expenditure, and further work to enhance the procedures for resolving unviable financial institutions and build on recent efforts to improve the AML/CFT framework can further strengthen financial stability.
“The authorities are implementing their ambitious agenda to address challenges posed by climate change; introducing climate elements in public investment management and public-private partnerships, strengthening the framework to respond to climate events, assessing climate risks in the financial system, creating incentives to foster the transition to renewables and energy efficiency, and working with development partners to catalyze climate financing. Going forward, medium-term policies to foster potential growth, tackle supply-side constraints and raise productivity should unleash Jamaica’s potential in the long run.
Efforts to strengthen the social safety net can also foster inclusive growth. Current plans to introduce an unemployment insurance scheme have the potential to help lessen income volatility and ease the costs of a job search, and an expansion of coverage and enhanced targeting of the conditional cash transfer program could also help improve inclusiveness.
“The IMF team is grateful to the Jamaican authorities and other counterparts for their hospitality and very productive discussions.”
IMF Communications Department
