Early in 2013, the Government of Jamaica signed a new 4-year Extended Fund Facility (EFF) agreement with the IMF which was supported by other lending agencies. The IMF agreement provided for a number of pre-conditionalities including:

• A three-year wage restraint for public sector workers
• A new waiver regime
• The National Debt Exchange
• Various new legislation, Debt Management Act, Fiscal rule, Omnibus Banking Act among other Bills
• Various tax reform measures
• Implementation of an Economic Programme Oversight Committee (EPOC)

These measures have either been implemented or are well on the way to implementation. With the welcome success of the National Debt Exchange in February and March 2013, interest costs for central government have been significantly lowered and financing pressures have been relieved by pushing out debt maturities by several years. The resulting substantial reduction in Government’s appetite for debt will channel more resources to private sector direct investment an important stimulus for economic growth.

The new economic programme aimed to avert near-term fiscal deficiencies while creating the conditions for sustained growth and to provide a framework for critical steps and policy reforms to significantly enhance fiscal and debt sustainability and meaningful economic growth.

Throughout 2013, EPOC monitored monthly performance and the IMF performed quarterly tests. Policy implementation and structural reforms progressed well and key quantitative economic indicators either met or surpassed budget. These include:
• The primary balance of central government
• Tax revenues
• The balance of the public sector
• Net international reserves

The Government also embarked on a number of growth initiatives such as the Logistics Hub and Agro Parks project.

On September 24th, Standard & Poor’s upgraded the long-term foreign and local currency rating of Jamaica debt from CCC+ to B-. The September quarter also showed GDP growth, albeit modest, of 0.8%, the first after six quarters of decline. The debt-to-GDP ratio is moving down and some measures to reform the tax system and efficiency of the public sector are taking shape.

However, while the IMF programme was being managed well, other challenges needed attention. There was tight Jamaican dollar liquidity, since the NDX programme, which restrained banks from extending credit.

In addition, since August 2013, tax revenue consistently under-performed budget. By December the J$ declined 14% against the US$. Unemployment was at 15.3% and inflation 9.7%. Interest rates remained generally stable.

While there was good fiscal reform progress during 2013, the economy remains burdened by high debt with little room to put resources towards economic growth. The underperformance of tax revenues remains a great concern. Much more work is therefore required to achieve the goals of sustained growth, increased employment and improved living standards.

Richard O. Byles
President & CEO:
Sagicor Group Jamaica Limited