Jamaica has reaped praise for its macro-economic management in the latest Article IV consultation report written by the International Monetary Fund (IMF) and published on 8 February.
Article IV reports are written by teams of IMF economists after visiting a country and meeting the top economic officials; they are considered a bill of health on economic management. The latest of these reports referring to Jamaica is full of measured praise. The IMF says the country has been “nimble” in its response to major challenges: the coronavirus (Covid-19) pandemic, the war in Ukraine, and tighter global financial conditions. Despite these setbacks it said the government had got Jamaica back on a strong recovery path. Tourist flight arrivals had rebounded to pre-pandemic levels, and 2022 economic growth was expected at 4% (subsequent government data put this higher at 5.9%).
Inflation had ticked upwards in 2022 but was expected to ease back this year. High commodity prices had widened the current account deficit, but foreign currency reserves remained “healthy”, and the financial system was deemed to be “well capitalised and liquid”. The response to the upward surge in international food and fuel prices had been to allow for full “pass though” to the domestic economy while providing support for the poor within the existing fiscal position. Overall, the mix of fiscal and monetary policies had “struck the right balance in responding to shocks, protecting the vulnerable, countering inflationary pressures, and further securing debt sustainability”.
The IMF Executive Board assessment praised the policy of post-pandemic gradual fiscal tightening, coupled with “data-dependent monetary tightening”. However, it did argue that within existing financial parameters Jamaica should be identifying resources for extra investment in climate-resilient infrastructure, health, security, and education. There was also a call for strengthened tax and customs administration, as well as for an improved AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) framework.
Commenting on the report, the Financial Times Alphaville column said, “this is as close as the IMF comes to standing ovation”. The government is likely to be particularly pleased by the reduction in the debt-to-GDP ratio which a decade ago was at a highly dangerous 147%. According to the latest data from the finance ministry the ratio will have fallen to 79.7% by the end of this fiscal year (end-March 2023) and to 74.2% by the 2023-24 fiscal year. The Bank of Jamaica (BOJ) has said it expects growth to continue, propelled by tourism, agriculture, and the resumption of production at the Jamalco alumina plant. BOJ governor Richard Byles said on 21 February that the pace of growth would nevertheless ease as activity levels among Jamaica’s main trading partners “normalised” after the pandemic. Annual inflation fell from 9.4% in December to 8.1% in January and was now being estimated to fall to a 4.0%-6.0% target range by the end of this year.