In response to the report in the Jamaica Observer this week that International Monetary Fund (IMF) economists are pursuing a broad rethink of austerity-led programmes, Bert van Selm, IMF resident representative in Jamaica, weighed in on the direction followed by Jamaica which is nearing the completion of a four-year programme with the possibility of a follow-up to come.

An indication of the change of mind within the IMF was expressed in an article in the June edition of the Fund’s

Finance & Development magazine where three IMF economists said that instead of delivering growth, some neoliberal policies have increased inequality, in turn jeopardising durable expansion.

The authors, three members of the IMF research department, said the traditional approach to helping countries build their economies through tight government spending, privatisation, freer trade and open capital flows can have costs in terms of greater inequality.

Here is Van Selm’s take as it relates to Jamaica, which includes the observation that key changes are already under way locally:

• Jamaica has made major progress in restoring macroeconomic stability over the last three years. Key macroeconomic indicators have improved, with higher reserves, lower inflation, and an impressive reduction in public debt of about 20 percentage points of GDP. Jamaica has regained access to domestic and international capital markets, and the yield on Jamaica’s debt has declined to the average for emerging markets. It is important to preserve these gains, while also looking for ways to further boost economic growth and job creation.

• All IMF-supported reform programmes are under regular review and allow for flexibility given individual country circumstances. A team from Washington visits Jamaica every quarter to help assess economic development and discuss the way forward, with the Jamaican authorities and other stakeholders.

• The team led by Ms Ramakrishnan was here last month, to conduct the combined 11th and 12th EFF reviews, and the findings of the team will be discussed by the IMF Board later this month (and published shortly after that).

· During the recent visit of the team, personal income tax reform was of course an important topic for discussion. The shift from direct to indirect taxation that is a high priority for the new government of Jamaica, and that is supported by the IMF, is a good example of flexibility in the context of an IMF programme. The team also noted the need for further consideration of improving PATH and targeted conditional cash transfers to reduce the impact of the higher indirect taxes on the poor and vulnerable. New elements can be introduced as conditions change, or as assessments of the best way forward are revised.

• Another key change under the IMF-supported programme was introduced at the time of the 10th review, late in 2015, with the reduction in the primary surplus targets by 0.25 and 0.5 per cent of GDP in FY15/16 and FY16/17, to 7.25 per cent and 7.0 per cent of GDP, respectively. This was made possible by strengthening debt dynamics in the first half of the programme, supported in particular by the 2015 PetroCaribe debt buyback. This created fiscal space for additional growth-enhancing capital outlays.

• At the same time, at around 128 per cent by March 2016, Jamaica’s debt-to-GDP ratio remains very high. Gradually reducing debt to a more manageable level will be critical to increase investor confidence and reduce risks. Bringing down the debt will require sustained high primary surpluses, combined with efforts to support growth, and sound debt management.