Durrant Pate/Contributor

The executive board of the International Monetary Fund (IMF) has given the thumbs up to Jamaica in its latest Article IV consultation and second reviews under both the Precautionary and Liquidity Line, and Resilience and Sustainability Facility arrangements with the island.

The IMG hailed Jamaica, noting, “over the last years, Jamaica has successfully reduced public debt, anchored inflation, and strengthened its external position. It has built a strong track record of investing in institutions and prioritising macroeconomic stability, which allowed Jamaica’s response to recent global shocks to be prudent, agile, and supportive of growth. 

After two years of rapid post-pandemic recovery, economic growth is projected at 1.7 per cent in FY2023/24 with tourism well above pre-pandemic levels and unemployment falling to a record low of 4.5 per cent by mid-2023. Inflation is converging to the Bank of Jamaica’s (BOJ’s) target band, though it was recently impacted by an increase in transport prices, whose effects are expected to dissipate towards the end of the year. 

Financial system well capitalised 

In its report, the IMF says projected strong tourism inflows are expected to result in a current account surplus for FY2023/24 supporting a sound international reserves position. “The financial system is well capitalised and liquid, and the public debt continues to fall,” the IMF declared.

According to the IMF, “the outlook points to sustained growth and inflation falling within the BOJ’s target range amid sound external and fiscal positions and financial system stability. Nonetheless, global risks remain high. A rise in global risk aversion may increase financing costs and lower projected global growth, and regional conflicts could increase global commodity prices.”

Finally, climate-related events could weaken economic activity. The Washington-based multinational funding agency praised Jamaican authorities, who continue to implement sound macroeconomic policies, aided by strong policy frameworks. Supported by buoyant revenues and strict control of non-wage spending, the IMF highlights that a prudent fiscal stance continues to support a reduction in public debt towards the target in the Fiscal Responsibility Law. 

Appropriate tight policy stance 

The IMF acknowledges that the BOJ has maintained an appropriately tight policy stance, and its data-dependent monetary policy is countering the inflationary impulse from a strong economic recovery, tight labour markets, and global commodity prices. This policy mix positions Jamaica well to respond to shocks, counteract inflationary pressures, and secure debt sustainability.

IMF deputy managing director and acting board chairman, Kenji Okamura, remarked, “Jamaica has continued to build a strong track record of investing in institutions and prioritising macroeconomic stability with support of the Precautionary and Liquidity Line and the Resilience and Sustainability Facility Arrangements.”

“Sound fiscal and external positions, entrenched macroeconomic stability, and sound policy frameworks continued to support economic growth and a prudent and agile response to global shocks,” he added.

Improving effectiveness of AML/CFT framework

The authorities have been commended by Okamura and the IMF board for taking decisive steps to improve the effectiveness of the AML/CFT framework and intend to build on this progress going forward. Efforts continue to improve financial policy frameworks, advance the adoption of Basel III, enhance consolidated supervision and work to strengthen the resolution regime of financial institutions. 

Going forward, the IMF cites that the policy frameworks would benefit from the gradual adoption of reforms to capital flow measures and further deepening of FX markets. Also continued efforts to build resilience to global shocks through prudent policies and reforms to tackle supply-side constraints and raise productivity can further unleash Jamaica’s potential and foster inclusive growth over the medium term.

IMF executive directors welcomed Jamaica’s strong policy frameworks and institutional reforms, which had led to substantial improvements in public debt, international reserves, and macroeconomic stability and supported a post-pandemic rebound in growth alongside declining inflation and unemployment. Directors noted the positive medium-term outlook subject to risks from tighter global financial conditions, lower global growth, higher commodity prices, and natural disasters. 

They supported ambitious reforms to unlock growth potential and strengthen resilience to shocks.