Tuesday 10 December, 2019

Jamaica in good stead to end borrowing relationship with IMF this year

EPOC co-chair, Keith Duncan's optimism is predicated on the country’s continued positive performance under the IMF programme.

EPOC co-chair, Keith Duncan's optimism is predicated on the country’s continued positive performance under the IMF programme.

Co-chair of the Economic Programme Oversight Committee, Keith Duncan is confident that Jamaica is in good stead to end its borrowing relationship with the International Monetary Fund, as the country’s US$1.6 billion agreement with the fund comes to an end this year.

Preliminary results for the island’s performance for the April to December 2018 period put the government on track to meet the Quantitative Performance Criteria and indicative targets for the IMF Precautionary Stand-By Arrangement (PSBA), with the exception of the inflation target.

Despite the missed inflation target and growth level persisting below two per cent - the economy seems poised for growth in the medium term, the EPOC co-chair said, noting that tax revenues remained buoyant and capital expenditure was significantly up.

“I believe that with the level of NIR, with debt to GDP being at 90 to 93 per cent, Jamaica is in a good place to be able to move on its own,” Duncan told EPOC’s quarterly press briefing on Tuesday.

Tax revenues of $338.7 billion outperformed IMF PSBA target of $360 billion and the government’s first supplementary budget target of $387.1 billion. While expenditure for the first nine months of the fiscal year was $11.6 billion below budget.

Capital expenditure increased year-over-year by $14.4 billion from $31 billion for April through December 2017, to $45.4 billion in 2018.

As a result of the revenue and grants performance and the under-expenditure for the first nine months of the fiscal year, the primary balance of $107.7 billion exceeded the $68 billion IMF programme target and the government’s $89 billion first supplementary target for April to December 2018.

“Our debt levels are down, we have sufficient reserves, tax revenues are buoyant and we will continue to run a primary surplus so that our debt to GDP ratio can be reduced to 60 per cent in 2025/2026,” Duncan said.

With the debt to GDP down to 60 per cent, the government will be in a better position to channel funding to education, health and social intervention, Duncan said.

The EPOC co-chair said, with very few missed targets over the past six years under the programme, “both administrations have been very disciplined.”

“Definitely, we are poised to do this on our own and we are putting in the capacity, the minister of finance has indicated this, through central bank independence, and through setting up the fiscal council – independent bodies to ensure that Jamaica remains on track,” Duncan said

Fiscal councils are permanent, independent, non-partisan institutions, staffed by experienced and technically proficient persons to help to promote economically sustainable policies across political cycles, and are created by legislation.

The fiscal council and an FX trading platform are to be established later this year.

This FX platform will be integrated with the existing payments and settlements systems.

EPOC is of the view that this will lead to greater transparency, and price discovery could result in reduced volatility and trading margins, which could be positive for market participants.

“We are putting in the institutional architecture to protect Jamaica going forward,” he added.

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