Jamaica Passes Ninth IMF Test

On September 23rd 2015, the Executive Board of the International Monetary Fund (IMF) completed the ninth review of Jamaica’s economic performance und er the four year Extended Fund Facility (EFF).Following the review, the government of Jamaica was successful in passing the 9thquarterly test which will enable the disbursement of US$39.7Mn. The IMF continued to express positive sentiments regarding the progress made under the program and indicated that performance is on track and structural reforms have progressed broadly on schedule. With macroeconomic fundamentals strengthening, such as inflation being at a historical low and the current account improving, these factors have created the platform for more favorable perception and confidence in the sovereign. Progress towards meeting the debt target was fast-tracked in the recent Petrocaribe debt buyback. However the IMF was quick to point out that growth remains weak and unemployment needs to decrease further.

All the quantitative performance criteria were met and structural reforms were broadly on schedule. The central government’s primary balance target was met as higher tax receipts and lower than-projected capital expenditures overcompensated for a slight overrun in program spending and lower non-tax revenue and grants. Primary balance at June 2015 stood at $20.4Bn relative to the IMF target of $17.0Bn. Tax revenues exceeded budgetary expectations with favorable performances of corporate, excises and sales taxes, offset underperforming grants and non-tax revenue. Tax revenues were $95.4Bn relative to IMF floor of $88.0Bn. Structural targets such as the transition of the retail repo contracts to a trust-based framework were completed. The structural conditionality on tabling in Parliament a bill to strengthen the Customs Act has been met, as well as the structural benchmark for transitioning the retail repos to the Trust.

The IMF indicated that risks to the program remain high. Notwithstanding the authorities’ demonstrated resolve in implementing the program, more tangible signs of improvements in growth and job creation will be important to sustain the social consensus needed to continue on the reform trajectory. Revenue shortfalls or the inability to contain the government wage bill could undermine the fiscal position. An eventual reopening of the domestic bond market may prompt an upward shift in the yield curve and undermine financial sector stability. The run up to elections, which should be held before end-2016, could also potentially delay progress on program implementation and reform momentum if unbudgeted expenditures arise.