IMF Executive Board Completes Third Review Under Stand-By Arrangement with Jamaica and Approves US$49 Million Disbursement

Economic developments and growth of Jamaica are discussed in this paper. Despite the good performance under the program through end-September, mounting spending pressures and delays in some fiscal reforms have required the adoption of corrective measures by the authorities. The authorities concurred with IMF staff that the potential spending overruns reflected weaknesses in expenditure management that needed to be urgently addressed. To offset the expenditure overruns, the government has adopted a number of compensatory measures.

Abstract

Economic developments and growth of Jamaica are discussed in this paper. Despite the good performance under the program through end-September, mounting spending pressures and delays in some fiscal reforms have required the adoption of corrective measures by the authorities. The authorities concurred with IMF staff that the potential spending overruns reflected weaknesses in expenditure management that needed to be urgently addressed. To offset the expenditure overruns, the government has adopted a number of compensatory measures.

The Executive Board of the International Monetary Fund (IMF) today completed the third review of Jamaica’s economic performance under the Stand-By Arrangement (SBA). Completion of the review enables the immediate disbursement of an amount equivalent to SDR 31.9 million (about US$49.3 million), bringing total disbursements under the arrangement to SDR 541.8million (about US$838.2 million).

Jamaica’s performance under the program has been positive overall. All end-September quantitative performance criteria were met. The Executive Board approved modifications of certain performance criteria, including a small relaxation of some fiscal targets to accommodate spending related to Tropical Storm Nicole and an increase in the floor on net international reserves.

The IMF’s Executive Board approved a 27-month SBA in an amount equivalent to SDR 820.5 million (about US$1.27 billion) on February 4, 2010 (see Press Release No. 10/24).

Following the Executive Board Discussion on Jamaica, Mr. Murilo Portugal, Deputy Managing Director and Acting Chair, issued the following statement:

“Overall performance under the Stand-By Arrangement has been satisfactory. Signs of recovery have emerged, with net job creation for the first time in four quarters, and inflationary pressures remain subdued, allowing an accommodative monetary policy. The authorities’ macroeconomic program continues to focus on restoring fiscal sustainability and increasing the economy’s resilience to external shocks. Further progress is necessary on the fiscal and structural reform agenda. Enhancing competitiveness and the overall investment climate is key to boosting potential growth.

“The authorities stand ready to take appropriate and timely measures to achieve the program’s objectives. Efforts have been intensified to divest the state-owned mining company, and compensatory measures were adopted to offset expenditure overruns. The authorities intend to move decisively with public sector rationalization, tax policy, and debt management reforms. They remain committed to public financial management reforms. Full implementation of the fiscal reform agenda will create fiscal space for contingency buffers and increased spending on social programs and growth-enhancing capital projects.

“Prudential indicators point to continued resilience of the financial system. Financial sector reforms aimed at strengthening prudential requirements and the overall supervisory framework are moving ahead broadly on schedule. The authorities plan to gradually wind down the Financial System Support Fund during 2011 and use its resources for general purpose international reserves,” Mr. Portugal said.