Jamaica stands to receive US$224 million from the International Monetary Fund (IMF) after a delegation from the Washington-based financial institution ended a two week visit here on Friday.
IMF Mission Chief for Jamaica, Uma Ramakrishnan, said that a preliminary agreement had been reached with local authorities on a set of policies that aims to complete the fifth review under the 36-month US$1.68 billion Stand By Agreement (SBA) that was approved in November 2016.
She said consideration by the IMF’s Executive Board is tentatively scheduled for next month and that “upon approval, an additional US$224 million will be made available for Jamaica, bringing the total accessible credit to about US$1.4 billion.’
She said Jamaica continues to view the SBA as precautionary.
“Strong implementation of the reform programme continues, with the sustained commitment yielding tangible dividends for the people of Jamaica.
“Unemployment is near all-time lows, business confidence is high, and the economy is estimated to have expanded by 1.8 per cent in 2018, buoyed by mining, construction and agriculture. International reserves are estimated to be comfortable under a more flexible exchange rate,” the IMF official said.
She said all quantitative performance criteria at end-December 2018 were met, and the structural benchmark to table in Parliament amendments to the Bank of Jamaica (BOJ) Act was completed in October 2018.
“Inflation, however, was 2.4 per cent in December 2018, triggering staff consultation under the Monetary Policy Consultation Clause.
“With improving public debt dynamics, staff supports the reduction in the primary surplus target by half per cent of gross domestic product ( GDP) to six and a half per cent in the budget for the financial year 2019-20 to further boost growth and job creation. “
Ramakrishnan said the additional space accommodates much-needed growth-enhancing and social spending for citizen security, PATH, and rural infrastructure.
She said the delegation also welcomed the reductions of the distortionary financial turnover taxes – stamp duty, transfer tax, and minimum business tax, as well as a higher GCT threshold – within the budget envelope.
“These tax cuts are feasible because of the expanded tax base that has been achieved through commendable efforts in both tax policy and revenue administration. Overall, these budget measures are expected to lower the cost of doing business, reduce informality and increase economic activity.
““Looking ahead, accelerating public sector reforms, including a new compensation framework that rewards performance and the rationalization of the numbers of public bodies by prioritizing government functions, will improve public service delivery. This will further reduce the wage bill and release resources for social and growth-enhancing outlays.”
Ramakrishnan said swiftly and forcefully addressing the shortcomings in the governance of public bodies, including those identified in the Auditor General’s report on Petrojam, is critical to enhance transparency and accountability, reduce the scope for corruption, bolster trust in public institutions, and protect public funds.
She said the delegation welcomed the government’s proactive steps to strengthen domestic policy institutions in preparation for exit from Fund financial support later this year.
“The planned fiscal council, policy framework for natural disaster risks financing, macro-fiscal capacity building at the Ministry of Finance and the Public Service, and enshrining central bank operational independence constitute key pillars.
““We also applaud the BOJ’s innovative public engagement on the importance of stable and predictable inflation. Further monetary loosening is warranted to restore inflation to the target range of 4–6 per cent, including improving monetary transmission, while monitoring developments in oil prices, global financial conditions, and domestic factors.
“Maintaining a market-determined exchange rate with BOJ’s foreign exchange sales limited to episodes of disorderly market conditions is necessary for the shift to full-fledged inflation targeting.”
She said building on the recent FSAP recommendations, the authorities are working towards strengthening the financial sector’s oversight capacity, risk-based and consolidated supervision, implementing measures to further develop the foreign exchange and debt markets, and improving access to finance for businesses and households.
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