Abstract
IMF Country Report No. 23/83
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IMF Country Report No. 23/83
JAMAICA
2022 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STAFF STATEMENT
February 2023
Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2022 Article IV consultation with Jamaica, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its February 6, 2023 consideration of the staff report that concluded the Article IV consultation with Jamaica.
The Staff Report prepared by a staff team of the IMF for the Executive Board's consideration on February 6, 2023, following discussions that ended on December 14, 2022, with the officials of Jamaica on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on January 19, 2023.
An Informational Annex prepared by the IMF staff.
A Staff Statement updating information on recent developments.
The IMF's transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities' policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
© 2023 International Monetary Fund
Press Release
PR23/37
IMF Executive Board Concludes 2022 Article IV Consultation with Jamaica
FOR IMMEDIATE RELEASE
Washington, DC – February 10, 2023: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Jamaica.
Over the past few years, Jamaica has been buffeted by a difficult global environment—from COVID, the war in Ukraine, and the ongoing tightening of global financial conditions. Supported by sound policy frameworks and policies prioritizing macroeconomic stability, the economy is now recovering strongly. As COVID waned, stopover flight arrivals had rebounded to pre-crisis levels, and 2022 real GDP growth is expected to be around 4 percent. Pushed by global factors—in particular, the impact of the war in Ukraine on commodity prices—inflation has risen above the central bank's target band but is expected to decline during the course of 2023. High commodity prices have resulted in an increase in the current account deficit. However, international reserves remain at healthy levels. The financial system is well-capitalized and liquid.
The outlook points to a continued recovery in activity and inflation falling back within the Bank of Jamaica's target range by end-2023. Nonetheless, global risks remain high. The war in Ukraine may push commodity prices higher, a stronger-than-envisaged tightening of global financial conditions may curb capital flows and reduce remittances, and new COVID variants could disrupt tourism and trade. The authorities' response to recent shocks has been well designed. The fiscal policy response to COVID was nimble, supporting the economy in 2020 but then quickly resuming a downward path for the debt as the impact of the pandemic faded. Similarly, the response to the upward surge in fuel and food prices was to allow for full pass-through while providing targeted support to the poor within the existing fiscal envelope. The Bank of Jamaica has followed a data dependent tightening of monetary policy to counter the inflationary impulse arising from the rapid recovery in demand and increases in global prices. These policies have struck the right balance in responding to shocks, protecting the vulnerable, countering inflationary pressures, and further securing debt sustainability.
Executive Board Assessment2
Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities' strong track record of building institutions and prioritizing macroeconomic stability, which together with a nimble and prudent policy response helped Jamaica navigate successfully the pandemic and other recent global shocks. Directors noted that the continued recovery faces elevated uncertainty and risks from higher commodity prices, tighter-than-envisaged global financial conditions, new COVID outbreaks, and natural disasters.
Directors agreed that maintaining the planned path of primary balances coupled with continued data-dependent monetary policy tightening should further enhance debt sustainability, curb inflation, and create fiscal space to respond to future shocks. This prudent fiscal envelope should also identify resources for climate-resilient infrastructure, investments in health, security, and education. Directors also welcomed continued improvement of the fiscal policy framework, including strengthening tax and customs administration and public financial management systems, the recently established Fiscal Commission, and reforms of the wage structure to simplify the system and reward performance.
Directors supported ongoing reforms strengthening financial stability by adopting Basel III regulatory standards and bolstering supervision. They emphasized the need to enhance crisis management and consolidated supervision, and strongly encouraged the authorities to step up efforts to improve the AML/CFT framework in line with the action plan agreed with FATF. Directors also called for further efforts to deepen FX markets and refine the macroprudential framework. They took note of the nascent benefits for financial inclusion of central bank digital currency adoption, while stressing the need to manage possible risks.
Directors encouraged a multipronged approach to overcome constraints to growth. They stressed the need to strengthen education and training, upgrade infrastructure, digitalization of government services, reduce crime and barriers to trade. Social inclusion will benefit from the strengthened cash transfer program. Evidence-based policymaking would benefit from improved data quality and timeliness leading to subscription to the SDDS.
Directors encouraged reforms alleviating climate change challenges and long-term vulnerabilities. These reforms should strengthen physical and fiscal resilience, incentivize renewable energy generation, reduce energy consumption, develop markets for “green” financial instruments, and ensure proper recognition and management of climate risks. Reduced climate vulnerability would help catalyze private sector financing for climate-related investments. Directors looked forward to continued and enhanced collaboration with other international organizations to support these efforts.
Jamaica: Selected Economic Indicators
As of January in each period.
Fiscal years run from April 1 to March 31. Authorities' budgets presented according to IMF definitions.
Jamaica: Selected Economic Indicators
| Population (2019): 2.73 million | Per capita GDP (2019): US$5729 | |||
| Quota (current; millions SDRs/% of total): 382.9/0.08% | Literacy rate (2015)/Poverty rate (2017): 87%/12.6% | |||
| Main products and exports: Alumina, tourism, chemicals, mineral fuels, bauxite, coffee, sugar | Unemployment rate (July 2022): 6.6% | |||
| Key export markets: U.S., U.K., Canada | ||||
| 2020/21 | 2021/22 | 2022/23 | 2023/24 | |
| Act. | Act. | Proj. | Proj. | |
| Output | ||||
| Real GDP growth (%) | -11.0 | 8.2 | 3.5 | 2.0 |
| Employment | ||||
| Unemployment (%) 1/ | 8.9 | 6.2 | … | … |
| Prices | ||||
| Inflation, end of period (%) | 5.2 | 11.3 | 7.7 | 5.2 |
| Inflation, average (%) | 5.0 | 7.4 | 9.5 | 6.5 |
| Central government finances 2/ | ||||
| Budgetary revenue (% of GDP) | 29.5 | 31.0 | 29.4 | 29.4 |
| Budgetary expenditure (% of GDP) | 32.6 | 30.1 | 29.1 | 29.1 |
| Budget balance (% of GDP) | -3.6 | 0.9 | 0.3 | 0.3 |
| Of which: central government primary balance | 3.5 | 6.8 | 5.8 | 5.4 |
| Public entities balance (% of GDP) | -0.5 | 0.0 | 0.0 | 0.0 |
| Public sector balance (% of GDP) | -3.6 | 0.9 | 0.3 | 0.3 |
| Public debt (% of GDP) | 109.7 | 94.2 | 84.1 | 77.9 |
| Money and credit | ||||
| Broad money (% of GDP) | 74.4 | 70.4 | 68.4 | 68.2 |
| Credit to the private sector (% of GDP) | 57.7 | 52.9 | 51.6 | 51.9 |
| Treasury bill rate, end-of-period (%) | 1.5 | 6.4 | … | … |
| Treasury bill rate, average (%) | 1.7 | 3.9 | … | … |
| Balance of payments | ||||
| Current account (% of GDP) | -1.1 | -1.2 | -2.5 | -2.8 |
| FDI, net (% of GDP) | 1.3 | 1.9 | 2.3 | 2.7 |
| Gross international reserves (weeks of imports) | 9.0 | 6.4 | 5.2 | 5.0 |
| External debt (% of GDP) | 103.9 | 92.6 | 82.7 | 77.6 |
| Exchange rate | ||||
| End-of-period REER (appreciation +) (INS) | -8.4 | 1.0 | … | … |
As of January in each period.
Fiscal years run from April 1 to March 31. Authorities' budgets presented according to IMF definitions.
Jamaica: Selected Economic Indicators
| Population (2019): 2.73 million | Per capita GDP (2019): US$5729 | |||
| Quota (current; millions SDRs/% of total): 382.9/0.08% | Literacy rate (2015)/Poverty rate (2017): 87%/12.6% | |||
| Main products and exports: Alumina, tourism, chemicals, mineral fuels, bauxite, coffee, sugar | Unemployment rate (July 2022): 6.6% | |||
| Key export markets: U.S., U.K., Canada | ||||
| 2020/21 | 2021/22 | 2022/23 | 2023/24 | |
| Act. | Act. | Proj. | Proj. | |
| Output | ||||
| Real GDP growth (%) | -11.0 | 8.2 | 3.5 | 2.0 |
| Employment | ||||
| Unemployment (%) 1/ | 8.9 | 6.2 | … | … |
| Prices | ||||
| Inflation, end of period (%) | 5.2 | 11.3 | 7.7 | 5.2 |
| Inflation, average (%) | 5.0 | 7.4 | 9.5 | 6.5 |
| Central government finances 2/ | ||||
| Budgetary revenue (% of GDP) | 29.5 | 31.0 | 29.4 | 29.4 |
| Budgetary expenditure (% of GDP) | 32.6 | 30.1 | 29.1 | 29.1 |
| Budget balance (% of GDP) | -3.6 | 0.9 | 0.3 | 0.3 |
| Of which: central government primary balance | 3.5 | 6.8 | 5.8 | 5.4 |
| Public entities balance (% of GDP) | -0.5 | 0.0 | 0.0 | 0.0 |
| Public sector balance (% of GDP) | -3.6 | 0.9 | 0.3 | 0.3 |
| Public debt (% of GDP) | 109.7 | 94.2 | 84.1 | 77.9 |
| Money and credit | ||||
| Broad money (% of GDP) | 74.4 | 70.4 | 68.4 | 68.2 |
| Credit to the private sector (% of GDP) | 57.7 | 52.9 | 51.6 | 51.9 |
| Treasury bill rate, end-of-period (%) | 1.5 | 6.4 | … | … |
| Treasury bill rate, average (%) | 1.7 | 3.9 | … | … |
| Balance of payments | ||||
| Current account (% of GDP) | -1.1 | -1.2 | -2.5 | -2.8 |
| FDI, net (% of GDP) | 1.3 | 1.9 | 2.3 | 2.7 |
| Gross international reserves (weeks of imports) | 9.0 | 6.4 | 5.2 | 5.0 |
| External debt (% of GDP) | 103.9 | 92.6 | 82.7 | 77.6 |
| Exchange rate | ||||
| End-of-period REER (appreciation +) (INS) | -8.4 | 1.0 | … | … |
As of January in each period.
Fiscal years run from April 1 to March 31. Authorities' budgets presented according to IMF definitions.
Title Page
JAMAICA
STAFF REPORT FOR 2022 ARTICLE IV CONSULTATION
January 19, 2023
KEY ISSUES
Context. Jamaica has built a strong track record of investing in institutions and prioritizing macroeconomic stability. This aided the country to adapt to the difficult global environment of the past few years. The authorities provided targeted support to vulnerable households and firms during the pandemic but promptly scaled it back as conditions normalized. Similarly, in the wake of the war in Ukraine, domestic food and energy prices adjusted in line with shifts in international markets while targeted support was provided to the poor.
Outlook and Risks. The economy is expected to continue its post-COVID recovery, with inflation returning to the central bank's target range by end-2023. The outlook is subject to downside risks from potential new COVID waves, higher commodity prices, a global slowdown, and tighter than expected global financial conditions.
Policy Issues. Discussions focused on the prompt post-COVID fiscal consolidation and monetary policy tightening, which were instrumental to secure debt sustainability, respond to global shocks and aid the return of inflation to the target band. The staff assess that maintaining high primary balances over the medium term remains important for debt sustainability. The staff also welcome efforts to strengthen the Bank of Jamaica's institutional framework, make the fiscal commission to enhance the fiscal responsibility framework operational, and reorient the public sector pay structure to simplify the system and reward performance. The ongoing implementation of Basel III and expansion of the supervisory perimeter should continue. Going forward, further efforts are needed to reform the resolution regime for non-viable financial institutions, enhance consolidated supervision, and strengthen the AML/CFT framework. A multipronged approach will be needed as well to raise productivity and support the poor.
Climate Change Challenges. The Article IV consultation places a special focus on climate change. Despite contributing insignificantly to global greenhouse gas emissions, Jamaica's geographical and socio-economic characteristics make the country vulnerable to climate events that are becoming larger and more frequent due to global warming. This calls for policies and reforms to reduce vulnerabilities, notably on adaptation, though mitigation and transition to a low-carbon economy need to be tackled as well.
Approved By
Nigel Chalk and Andrea Schaechter
Discussions took place in Kingston during December 5–14, 2022. The staff team comprised Esteban Vesperoni (head), Saji Thomas, Mariusz Sumlinski (all WHD), Nicoletta Feruglio (FAD), and Julia Faltermeier (SPR). Siyao Chen and Sheng Tibung (both WHD) provided research and editorial assistance. Mr. Jennings (Executive Director) and Ms. Cunningham (Senior Advisor, OED) participated in the discussions. The team met with Minister of Finance Nigel Clarke, Central Bank Governor Richard Owen Byles, other senior officials, private sector, and civil society representatives.
Contents
A CHALLENGING GLOBAL ENVIRONMENT
RECENT DEVELOPMENTS
OUTLOOK AND RISKS
POLICY DISCUSSIONS
A. Short-Term Policies
B. Underpinning a Prudent Medium-Term Fiscal Path
C. Strengthening the Monetary Policy Framework
D. Financial Stability
E. Supporting Inclusive Growth
F. Addressing Climate Change Challenges
STAFF APPRAISAL
BOX
1. AML/CFT Framework
FIGURES
1. Real Sector Developments
2. Fiscal Sector Developments
3. External Sector Developments
4. Monetary and Financial Sector Developments
TABLES
1a. Selected Economic Indicators (Fiscal Year)
1b. Selected Economic Indicators (Calendar Year)
2a. Summary of Central Governmental Operations (In millions of Jamaican dollars)
2b. Summary of Central Government Operations (In percent of GDP)
3. Summary of Balance of Payments
4. Summary Monetary Survey
5. Financial Soundness Indicators
6. Indicators of Fund Credit 2022–30
ANNEXES
I. Progress on 2021 Article IV Policy Recommendations
II. Risk Assessment Matrix
III. Building Resilience to Natural Disasters and Climate Change
IV. External Sector Assessment
V. Debt Sustainability Analysis
VI. Capacity Development Strategy
VII. Capacity Development Integration Matrix (As of August 2022)
Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
