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| The IMF stressed that "continued vigilance over the financial sector is warranted, in particular with respect to the risks posed by the unregulated investment schemes promising implausibly high rates of return". (file photo) | |
KINGSTON, Jamaica, May 15, 2008 - The International Monetary Fund (IMF) has expressed concern about the growth of unregulated investments schemes in Jamaica and has urged both national and regional responses to the situation.
At the recent conclusion of its Article IV consultation with the island, the Executive Board noted that while there were some positive indicators of "banking sector soundness", the increase in the particular investment schemes has been a worrisome financial development with potentially adverse macroeconomic consequences.
The IMF stressed that "continued vigilance over the financial sector is warranted, in particular with respect to the risks posed by the unregulated investment schemes promising implausibly high rates of return".
"Directors were encouraged by the authorities' intention to prevent unregulated investment schemes that are not in the public interest, while ensuring that legitimate investments can proceed. They supported the authorities' request for technical assistance in this regard," an IMF release said.
"Given the cross-border risks posed by such schemes, Directors also encouraged enhanced regional cooperation among supervisors. They called on the authorities to broaden the collection of information on the formal financial system to allow for a more comprehensive assessment of systemic risks, including from changes in the global and domestic economic environments."
In its overall assessment of Jamaica, the IMF noted that the country's economic challenges have been compounded by a more difficult environment, with natural disasters, the global economic slowdown, and increases in global oil and food prices contributing to slower economic growth, rising inflation and a widening current account deficit.
"Strains in international financial markets have put further pressure on an economy reliant on external financing," it said, adding that the key imperatives now would be to address the economy's vulnerabilities, improve Jamaica's lacklustre growth performance, and strengthen its medium-term public debt dynamics.
"Against this background, Directors welcomed the authorities' efforts at setting out an ambitious medium-term macroeconomic strategy that places high priority on the maintenance of macroeconomic stability, fiscal consolidation, and structural reforms. They encouraged the authorities to work expeditiously toward the implementation of their strategy and to build a broad domestic consensus in support of their reform initiatives," the release added.
The authorities' medium-term programme of fiscal adjustment, aimed at balancing the budget by the 2010/2011 financial year and at establishing a virtuous cycle of lower debt and higher growth, was also welcomed.
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