Jamaica ‘graduates’ from extended fund facility
WITH A new agreement pending approval by the board of the International Monetary Fund (IMF), Jamaica will not be subject to the last two reviews under the extended fund facility (EFF) the previous government entered more than three years ago.
Last week, the Andrew Holness-led administration announced that it has reached a staff-level agreement on a new economic programme that would be supported by a threeyear precautionary standby arrangement with access to about US$1.7 billion.
IMF mission chief to Jamaica Dr Uma Ramakrishnan said that as a consequence, the last two reviews under the extended fund facility would not take place.
“We have finished 13 reviews. The 14th review, if it was to take place, would go to the board in December, and the 15th would have gone to the board in March,” she told Wednesday Business in an interview last week.
“We see this as a sort of graduation for Jamaica from the EFF to something different,” she said.
She said Jamaica’s exemplary achievements under the EFF “and the fact that it is being replaced by a much larger amount speaks to the vote of International Monetary Fund Mission Chief to Jamaica, Dr Uma Ramakrishnan.
confidence that the Fund has in Jamaica’s performance.”
The mission chief explained that the standby agreement is precautionary to the extent that the money will be available to the Government and can be
drawn if there is an adverse shock, for example, if there is a natural disaster or a change in commodity prices that adversely impacts the country.
Dr Ramakrishman said there would be continuity in terms of
maintaining the macroeconomic stability that has been achieved under the extended fund facility, emphasising, however, that “macro stability is not a sufficient condition for growth”. In that sense, the new programme will focus on, among other things, growth and job creation.
She expects that following the board’s approvals, there will still be periodic reviews but they may be less frequent than the quarterly tests which occurred under the EFF.
The quantitative framework underlying the new arrangement will entail criteria similar to those in the EFF so that the macroeconomic stability that has been achieved so far can be maintained going forward, Dr Ramakrishnan said.
“Meeting the conditionalities under the new programme is no different from the EFF,” she said, adding that “the process by which the board approves reviews is the same as it is under the EFF”.
She said the the programme is more broad-based than maintaining macroeconomic stability, and the goal is to achieve higher growth.
“So there are reforms that are associated with achieving those goals,” the mission chief said.
Asked if the IMF should make a reduction in crime a conditionality of the new programme, Dr Ramakrishnan pointed to an Article IV consultation completed in June, in which they undertook a growth diagnostic study which showed that crime was the number one growth impediment in Jamaica.
“I think there is broad-based recognition that something needs to be done about it. But this is also a huge domestic problem. It is not something that the IMF, for example, can say doing X, Y or Z is going to solve the problem. This takes time, this takes resources, this takes a commitment. There’s a lot of dimensions that needs to be covered in order to achieve success in resolving crime,” the mission chief said.
“For us to be putting conditions on crime, knowing how complex this issue is ... we are not crime experts, so we wouldn’t know what would be the right conditions that we should be placing emphasis on,” she added.
However, Dr Ramakrishnan said they support the Government’s efforts to solve crime, and “we do consider it as a very important part in order to reach the growth objectives that they have set for themselves. We highlight this as a problem that needs to be tackled, and that it is critical for security issues to advance in the context of the new arrangement.”
Completion of staffing of Tax Administration Jamaica as a semi-autonomous revenue authority.
IExecution of transfer pricing implementation strategy to begin.
IComplete drafting of regulations to implement the Special Economic Zone Act.
ICommence hiring of the Special Economic Zone Authority’s management team.
ICash transfers for intragovernment transactions, which can be replaced by journal vouchers, will be eliminated.
IBank of Jamaica will start equalising the reserve requirements for foreign currency and domestic currency deposits in the banking system.
A new procurement manual will be prepared with the assistance of the Inter-American Development Bank.
Phase III of the Customs Act will be tabled in parliament.