At the end of a one-week visit to Jamaica, an International Monetary Fund (IMF) team has indicated that the country’s economy recovery is now ahead of target and that sustained fiscal discipline was reducing the public debt.
In a preliminary report, the IMF Mission Chief for Jamaica, Uma Ramakrishnan, said that in the financial year 2017-18 the central government’s primary surplus was 7.7% of GDP and the country exceeded its budget target by 0.7% of GDP. She also reported that the country had ‘record-high employment levels, an 11-year low unemployment rate, and a significantly lower poverty rate’, particularly with respect to rural poverty. These developments, the IMF team said now ‘underpinned the Jamaican economy’.
The report noted too that a rapid deceleration in food and electricity prices had contributed to inflation falling below the Bank of Jamaica’s (BOJ) target range of 4-6% in March and April 2018.
The IMF said that gross international reserves reached US$3.7bn at the end of May, or about 25 weeks of imports. Less positively it noted that the current account deficit jumped to 5.2% of GDP, but attributed this to one-off factors including import of capital equipment for mining and security, and higher world oil prices. Ramakrishnan said the improved central government primary surplus was due to buoyant taxes and some underperformance in capital spending.
Strikingly, the IMF report indicated that because of Government’s ability to sustain fiscal discipline meant that its primary surplus had exceeded 7% of GDP annually since 2013-14, helping reduce public debt to about 104% of GDP at end-March 2018, down from 145% five years ago.
The IMF team noted that a four-year wage agreement provided a window to overhaul the public sector’s compensation structure and to prioritise government functions through funding social priorities, combatting crime, and pursuing growth-enhancing capital spending.
The report also welcomed new initiatives to further entrench fiscal sustainability, the creation of an independent fiscal council, the Bank of Jamaica’s intention to cut interest rates further, and inflation targeting.
In separate comments the Public Service Minister, Dr Nigel Clarke, said that barring any unforeseen circumstances, Jamaica would be able to graduate from the IMF borrowing programme when existing arrangements expired in 2019.
He also stressed the importance of the proposed fiscal council as a permanent, independent, non-partisan institution, created by legislation and staffed by competent persons who will be able to promote sustainable fiscal policies across political cycles.
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