IMF: Jamaica’s track record impressive but growth subdued
Jamaica has retained its good rating with the International Monetary Fund (IMF), five years after the country began the task of reforming its economy through the fund’s Stand-By Arrangement (SBA).
The IMF’s executive board yesterday completed the fourth review of Jamaica’s performance under the programme.
But while it hailed the government for its implementation of reforms over the years, the IMF highlighted that structural impediments continue to hinder growth for the country.
“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,” the IMF warned.
Against this backdrop, IMF has recommended that Jamaica implement supply-side reforms to facilitate private sector investment that is needed to achieve higher, sustained growth and job creation.
In its report, IMF recommended that Jamaica’s financial sector be further strengthened in line with the recommendations from the accompanying Financial Sector Stability Assessment.
The IMF added that priority should be placed on enhancing coordination, data collection, monitoring, and strengthening the 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,” it said.
It also called on the government to ensure that the public sector wage bill is placed on a downward path, adding that reduced wage outlays will allow the government to re-prioritize 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,” it said.
Meanwhile, the IMF commended steps taken by the Bank of Jamaica in modernizing its system to facilitate the needed move to full-fledged inflation targeting.
The Bank of Jamaica (BOJ) remains committed to maintaining inflation within the four to six percent target range over the medium term. The government also plans on accelerating the FX market development and the building of technical capacity in monetary operations.
“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 IMF said.