Jamaica passes second IMF test

KINGSTON, Jamaica, Tuesday August 31, 2010 – Jamaica has again met the performance targets under the International Monetary Fund’s (IMF) Stand-By Arrangement (SBA).

The Fund’s Mission Chief to Jamaica, Dr Trevor Alleyne, said the targets were met at the end of June.

“We think the overall pace and direction of the very ambitious structural reform agenda is advancing as scheduled,” he said.

This was the second quarterly performance test for the Jamaican economy, since the US$1.27 billion Stand-by Agreement was signed with the Fund in February this year. It will result in the disbursement of some US$48 million from the IMF.

An IMF team has been in the island for the past week and a half carrying out a review of the country’s performance.

“With respect to the end of June quantitative targets, we have seen that a faster than expected improvement in macro-economic conditions, especially the decline in interest rates and government securities, has had a net positive effect on the overall fiscal deficit situation,” Dr Alleyne said.

He noted that very strong General Consumption Tax (GCT) collections were seen in the first quarter of the fiscal year, reflecting improved tax administration efforts. He also pointed out that the continued “cautious and disciplined” execution of the budget were key to meeting the primary surplus target.

Dr Alleyne explained that the exchange rate has stabilised at an appreciated level, and that the international reserves floor target was exceeded by a very large margin.

“With respect to the structural reform agenda, we have found that the authorities have prepared amendments to strengthen the effectiveness of the fiscal responsibility framework, which is a very key institutional reform to improve public financial management,” he said.

The Mission Chief also revealed that work on the creation and development of a centralised treasury management system is going forward, as scheduled. The Public sector reform programme is also moving ahead, with the master rationalisation plan being presented to Parliament, and there is continued progress in the divestment programme of the public enterprises in Jamaica.

In terms of the financial sector, he noted that the phasing in of enhanced capital requirements has begun, with implementation of the first phase of risk waiting on foreign currency government securities in financial institutions.

“The preparation of reforms to key legislation, aimed at further strengthening the supervisory and regulatory framework of the financial system, is also moving ahead as scheduled,” he said.

Minister of Finance and the Public Service, Audley Shaw, said he appreciated the fact that the IMF has demonstrated that it has the capacity to be responsive to changing needs.

An example, he said, was the fallout from the West Kingston operation, which has resulted in an adjustment to certain expenditure in areas that had to be made, which the IMF is well aware of.

Another area that had to be considered was that funds were required to procure parts for CT scanners in two major hospitals, Kingston Public Hospital and Cornwall Regional, which cost approximately US$600,000.

The Minister said that an additional J$60 million (US$708,800) has to be set aside, immediately, for the Ministry of Health’s vector control programme.

“Here again, the IMF fully understands those kinds of emergency expenditures, and we have to make room in terms of our primary balance targets to accommodate that,” he said.