Durrant Pate/Contributor

Jamaica scored exceptionally well in its latest Article IV consultation, which was concluded two weeks ago with the International Monetary Fund (IMF) and published yesterday.

In its assessment, the IMF Board acknowledges, “over more than a decade Jamaica has been implementing sound macroeconomic policies supported by strong policy frameworks. These efforts have allowed Jamaica to accumulate meaningful policy buffers, reduce public debt, anchor inflation, and improve its external position.”

Citing that, “recent policy efforts have further strengthened fiscal responsibility, improved the effectiveness of public sector compensation, bolstered tax and customs administration, enhanced financial oversight,” the IMF commends “the Jamaican authorities for building resilience to climate change including in the context of the recently completed PLL/RSF (Precautionary and Liquidity Line/Resilience and Sustainability Facility) arrangements.” 

The PLL and RSF are IMF arrangements designed to provide financial support to countries with sound policies in which Jamaica is a subscriber. These arrangements support Jamaica’s efforts to strengthen its fiscal and monetary policy frameworks, improve financial supervision, and enhance its climate resilience. 

Successfully reducing public debt

These advances allowed agile, prudent, and growth-supportive responses to recent global shocks and natural disasters. Over the last decade, Jamaica has successfully reduced its public debt, firmly anchored inflation and inflation expectations and strengthened its external position, building an enviable track record of investing in institutions and prioritising macroeconomic stability. 

The IMF observes that Jamaica has met recent global shocks and natural disasters in an agile, prudent and growth-supportive manner. While the economy declined in the last financial year, due to these factors, the IMF says economic activity is projected to normalise as these effects wane. 

Unemployment has fallen to all-time low levels (3.7 per cent in January 2025) and inflation has converged to the Bank of Jamaica (BOJ)’s target band of 4-6 per cent. The multinational lending institutions also cited Jamaica’s current account, which has been in surplus for the last two fiscal years, with strong tourism revenues and high remittances.

Positive outlook for Jamaica

In addition, the international reserves’ position has continued to improve. The outlook, IMF says “points to growth settling at its potential rate once the FY2025/26 recovery is complete with inflation stabilising within the BOJ’s (Bank of Jamaica) target range. Nonetheless, global developments require continued close monitoring as downside risks emanating from tighter global financial conditions, lower growth in key source markets for tourism, and trade policy disruptions remain high.

“Extreme weather events could negatively affect economic activity,” the IMF also assess, noting “the Jamaican authorities are implementing sound macroeconomic policies in the context of strong policy frameworks. A prudent fiscal stance supports a reduction in public debt towards the target in the Fiscal Responsibility Law (FRL).”

The IMF contends that while the economy declined in FY2024/25 due to the weather events, it is rebounding this year and is projected to grow at its potential rate with risks broadly balanced. The recovery is supported by a rebound in agriculture and tourism and its spillovers to other sectors, encouraging that “maintaining primary fiscal surpluses to reach the FRL’s ceiling of 60 per cent of GDP by FY2027/28 remains essential.“

Flexing FRL target

However, it states that “fiscal policy could become too pro-cyclical in the face of severe shocks when the debt-to-GDP ratio reaches the FRL’s target. Incorporating an explicit operational medium-term debt anchor in the FRL at a level below 60 per cent of GDP would help guide policies and ensure that debt is kept at moderate levels, creating fiscal buffers to respond to adverse events.“

The timeline for the eventual adoption of an operational debt anchor should be assessed in the context of heightened uncertainties, which could limit the country’s ability to meet a lower debt anchor in the medium term.