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Statement by an IMF Mission to Jamaica
Issued By: THE INTERNATIONAL MONETARY FUND
Tuesday, May 18, 2010
Mr. Trevor Alleyne, chief of the Caribbean division of the International Monetary Fund (IMF) and head of the mission to Jamaica, issued the following statement today in Kingston:
"An IMF team visited Kingston during May 4-18 to conduct the first review of the economic program under the Stand-By Arrangement (SBA) approved by the Fund's Executive Board on February 4, 2010. The team met with the Minister of Finance Hon. Audley Shaw, Bank of Jamaica Governor Brian Wynter, and senior officials including Dr. Wesley Hughes, Financial Secretary, Mr. Rohan Barnett, Executive Director of the Financial Services Commission, and Mrs. Audrey Anderson, Senior Deputy Governor of the Bank of Jamaica. The team thanks the authorities and technical staff for their excellent cooperation.
"As part of the SBA, a number of quarterly performance criteria have been established to gauge the performance of the economic program. These relate to the pillars of the program, namely fiscal consolidation and institutional reform, public debt restructuring, and financial sector reform. Given the high debt stock and interest payments, a prior action required a reduction in interest rates and an extension of maturities through the Jamaica Debt Exchange (JDX). Quantitative criteria include quarterly targets for the central government primary surplus, the balance of the public bodies, central government direct and guaranteed debt, net domestic assets of the Bank of Jamaica, and the net international reserves (NIR).
"All quantitative performance criteria for the end-March 2010 test date were met, without the need for waivers, and substantial progress was made on the structural reform agenda. Stepped up tax administration measures and expenditure restraint were responsible for meeting the fiscal targets. Improved economic prospects following the approval of the SBA and the Jamaica debt exchange have resulted in substantially better financial market conditions: risk premia on Jamaican sovereign bonds have declined as have domestic interest rates, and the exchange rate has stabilized. In this environment, the NIR floor was exceeded by a comfortable margin. On structural reforms, the mission commends the authorities for passage of the new fiscal responsibility framework that will significantly improve the public expenditure management system; the divestment of Air Jamaica; and the notable progress in preparing reforms to improve tax administration and treasury management, and further strengthen the supervisory and regulatory framework of the financial system.
"The mission and the authorities have agreed on an updated draft Letter of Intent, which will still need to be approved by the Cabinet and IMF's management. Based on the performance of the economic program, the mission will recommend that at the IMF Executive Board completes the First Review of the SBA, which will result in the disbursement of SDR 63.7 million. The Board is expected to meet before the end of June.
"The mission has been impressed by the level of commitment by the authorities to the economic program and by the broad social consensus that was crucial to making the JDX a success. Going forward, this partnership between the public and private sectors will be vital to the program's continued success. Risks to the program remain high, including from external and domestic shocks. Growth and employment are expected to remain weak during the current year as the economy transitions to an improved, fundamentally stronger basis. However, the mission is confident that continued implementation of the program will help boost investor confidence, and establish the conditions that will permit an increase in growth and employment, and improved living standards for all Jamaicans."
Issued By: THE INTERNATIONAL MONETARY FUND
Tuesday, May 18, 2010
Mr. Trevor Alleyne, chief of the Caribbean division of the International Monetary Fund (IMF) and head of the mission to Jamaica, issued the following statement today in Kingston:
"An IMF team visited Kingston during May 4-18 to conduct the first review of the economic program under the Stand-By Arrangement (SBA) approved by the Fund's Executive Board on February 4, 2010. The team met with the Minister of Finance Hon. Audley Shaw, Bank of Jamaica Governor Brian Wynter, and senior officials including Dr. Wesley Hughes, Financial Secretary, Mr. Rohan Barnett, Executive Director of the Financial Services Commission, and Mrs. Audrey Anderson, Senior Deputy Governor of the Bank of Jamaica. The team thanks the authorities and technical staff for their excellent cooperation.
"As part of the SBA, a number of quarterly performance criteria have been established to gauge the performance of the economic program. These relate to the pillars of the program, namely fiscal consolidation and institutional reform, public debt restructuring, and financial sector reform. Given the high debt stock and interest payments, a prior action required a reduction in interest rates and an extension of maturities through the Jamaica Debt Exchange (JDX). Quantitative criteria include quarterly targets for the central government primary surplus, the balance of the public bodies, central government direct and guaranteed debt, net domestic assets of the Bank of Jamaica, and the net international reserves (NIR).
"All quantitative performance criteria for the end-March 2010 test date were met, without the need for waivers, and substantial progress was made on the structural reform agenda. Stepped up tax administration measures and expenditure restraint were responsible for meeting the fiscal targets. Improved economic prospects following the approval of the SBA and the Jamaica debt exchange have resulted in substantially better financial market conditions: risk premia on Jamaican sovereign bonds have declined as have domestic interest rates, and the exchange rate has stabilized. In this environment, the NIR floor was exceeded by a comfortable margin. On structural reforms, the mission commends the authorities for passage of the new fiscal responsibility framework that will significantly improve the public expenditure management system; the divestment of Air Jamaica; and the notable progress in preparing reforms to improve tax administration and treasury management, and further strengthen the supervisory and regulatory framework of the financial system.
"The mission and the authorities have agreed on an updated draft Letter of Intent, which will still need to be approved by the Cabinet and IMF's management. Based on the performance of the economic program, the mission will recommend that at the IMF Executive Board completes the First Review of the SBA, which will result in the disbursement of SDR 63.7 million. The Board is expected to meet before the end of June.
"The mission has been impressed by the level of commitment by the authorities to the economic program and by the broad social consensus that was crucial to making the JDX a success. Going forward, this partnership between the public and private sectors will be vital to the program's continued success. Risks to the program remain high, including from external and domestic shocks. Growth and employment are expected to remain weak during the current year as the economy transitions to an improved, fundamentally stronger basis. However, the mission is confident that continued implementation of the program will help boost investor confidence, and establish the conditions that will permit an increase in growth and employment, and improved living standards for all Jamaicans."
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