IMF says government must implement supply side reforms to facilitate economic growth

by November 7th, 2018

The International Monetary Fund, has indicated that the Jamaican government needs to implement supply side reforms to facilitate further economic growth and job creation.


The IMF Executive Board completed its fourth review under the stand-by arrangement for Jamaica on Monday.


In a statement, the IMF noted that program implementation remains strong 5 years into the economic reforms.


It also noted that structural impediments need to be quickly addressed to foster private capital formation and accelerate growth and job creation.


The IMF said modernizing the Central Bank will help facilitate the needed move to full-fledged inflation targeting.


IMF Deputy Managing Director and Acting Chair Tao Zhang, stated that Jamaica continues its impressive track record under the stand-by arrangement.


He said while macroeconomic stability is entrenched, with reduced public debt and improving social and unemployment indicators, growth remains subdued.


Against this backdrop, supply-side reforms to facilitate private sector investment are needed to achieve higher, sustained growth and job creation.


He said the Bank of Jamaica remains committed to maintaining inflation within the 4 to 6 percent target range over the medium term.


The recent tabling in parliament of legislation to upgrade the BOJ act is an important step toward the eventual shift toward full-fledged inflation targeting.


He added that maintaining exchange rate flexibility and limiting FX sales during periods of disorderly market conditions are necessary to support an inflation targeting framework.


He said the authorities are also planning to accelerate FX market development and the building of technical capacity in monetary operations.


The IMF Deputy said the public-sector wage bill needs to be placed on a sustained downward path.


He said reduced wage outlays will allow the government to re-prioritize public spending toward security, social assistance, and growth-enhancing capital expenditure.


Achieving such a wage bill reduction will require a broad overhaul of the public compensation and allowance system and a reduction in the size of the government workforce.


He said the financial sector should be further strengthened in line with the recommendations from the accompanying financial sector stability assessment.


Priority should be placed on enhancing coordination, data collection, monitoring, and strengthening technical capacity of the financial regulators.


Improving consolidated and risk-based supervision are important reform areas.


He said addressing impediments that constrain access to finance would help support private-sector investment.