Some highlights from Jamaica’s 6th IMF Test Results

This information is an extract from the IMF publication of December 3, 2014.

Recent data show a gradual pick-up in economic activity in the aftermath of a recent drought, with growth projected to reach 0.9 percent in 2014/15. Inflation projections fluctuate around 8 percent, as food prices are pushed up temporarily by the drought while lower fuel prices are expected to persist.

The program is on track. All September 2014 quantitative performance criteria and structural benchmarks were met. Based on this strong performance and the authorities’ policy commitments, staff recommends completion of the sixth review.

Focus of the review. Discussions centered on the preparations for the 2015/16 budget, and reforms to strengthen the financial sector and boost growth. The authorities have deepened their efforts in supporting their ambitious fiscal goals by strengthening public financial management and revenue administration, and they reiterated their resolve to continue containing the wage bill. Steps have also been identified to advance the reform of the securities dealers and to increase the resilience of the financial system.

Risks to the program remain high. Without more tangible signs of improvements in growth, the social consensus for pushing ahead with reforms may prove difficult to sustain. Revenue shortfalls, disruptions in external financing (including from PetroCaribe), and inability to contain the government wage bill could undermine the fiscal position. Vulnerabilities in the financial system could become more prominent.

In a crucial statement the IMF Board opines, “Wide-ranging actions to boost the momentum for growth and employment creation are critical for the success of the program. While economic stabilization and debt reduction are on track and constitute an essential pillar of the growth strategy, reforms to enhance the business climate should be accelerated—including by cutting red tape, reforming the energy sector, and making the public sector more client-oriented”.

Read the full text at https://www.imf.org/external/pubs/ft/scr/2014/cr14359.pdf.