The International Monetary Fund (IMF) has expressed disappointment with the legal and operational infrastructure for financial stability in Jamaica, calling on the authorities to pull their act together in implementing plans to more tightly supervise the financial sector.

It is also suggesting that the Bank of Jamaica (BOJ) improve on its management of the exchange rate and thereby improve its “credibility”.

In the 2016 Article IV Consultation on Jamaica , directors of the IMF said reforms to the monetary framework should centre on achieving price stability, adding “a firmly established single mandate for achieving price stability will bolster the Bank of Jamaica’s credibility and lay the foundation for an eventual move to inflation targeting. In addition, the central bank’s liquidity provision should be made consistent with the loosened interest rate stance”.

The IMF said that it was its assessment that the Jamaican dollar, currently trading at just over $125 to the US dollar, is slightly overvalued, hinting at a need for correction.

“The level of the exchange rate appears broadly in line with fundamentals, but the balance of risks points toward a modest overvaluation,” the IMF report said.

The fund said that depreciation should only be to boost competitiveness. “In order to avoid eroding external competitiveness, the currency should be allowed to depreciate to offset the inflation differential with trading partners. A flexible exchange rate implies that any intervention in the foreign exchange market should be predominantly to build reserves and smooth out excessive exchange rate volatility.”

The fund asked for a more firmly established single mandate for achieving price stability.

The fund also expressed concern that the financial sector stability required further actions, despite substantial and significant reform undertaken to date.

Piloted by the BOJ and the Ministry of Finance, a new supervisory regime was introduced in the form of a revamped Bank of Jamaica Act and also a brand new Banking Services Act.

However, the IMF said that changes need to now be made operational.

It was noted in the consultation that, “enhancements to the legal and operational frameworks for the resolution of banks and securities dealers should be determined and set up without delay”.

It was further said that the amended Bank of Jamaica Act needs to be backed by “concrete tools, procedures, and complementary regulations in order to truly vest the central bank with overall responsibility for financial stability”.

The IMF said, as well, that information exchange and collaboration between the various supervisory agencies need further improvement, noting that strengthening prudential requirements for securities dealers will bolster systemic stability.

Currently, while the Bank of Jamaica produces and publishes prudential data on the 12 institutions directly under its oversight, the Financial Services Commission (FSC), which has responsibility for more than 40 dealers, keeps such data under wraps for individual dealers.

It is expected that under new arrangements for supervising the financial sector, broad oversight will become more transparent.

Furthermore, both the BOJ and the FSC are yet to make operational a new oversight committee for the financial sector of over 600 companies which should have been put in place from September 2015.