THE executive board of the International Monetary Fund (IMF) says that, while Jamaica’s economic programme remains strong, a number of issues are challenging the country’s growth performance.

Chief among these issues, according to IMF deputy managing director and Acting Chairman Tao Zhang, are: Vulnerability to weather-related shocks; prolonged wage negotiations with public sector trade unions, and the need to overhaul the pay structure and review the complex system of allowances in the public sector; reforming the Bank of Jamaica Act; implementation of the resolution framework for financial institutions; and the divestment of underutilised public assets.

According to Tao, who issued the statement after the IMF executive board completed its second review of Jamaica’s performance under the economic programme supported by the Stand-By Arrangement (SBA) on Monday, vulnerability to weather-related shocks continues to pose important challenges to Jamaica’s growth performance.

“Against this backdrop, supply-side reforms, including enhancing resilience to weather swings, must be accelerated to deliver better growth and job outcomes, reduce poverty, and improve living standards, while sustaining macroeconomic stability,” he said.

He stated that concluding the ongoing wage negotiations involving the Ministry of Finance and the public sector trade unions is necessary for budget certainty.

“More, generally, fiscal sustainability requires a continued reduction in the public wage bill, particularly as the Government rethinks its role, responsibilities, and size of its workforce,” the IMF boss said.

“Overhauling the pay structure and reviewing the complex system of allowances are vital foundations to a modern public sector that can attract and retain talent. In addition, a smaller public sector remains essential to create space for much-needed spending on health, education, social safety nets, public safety, and growth-enhancing capital projects,” he stated.

Tao added: “The authorities recognise that reforms to the Bank of Jamaica Act, further enhancing the monetary policy toolkit, improving communications, and strengthening the central bank’s balance sheet are essential for moving toward inflation targeting. To this end, the authorities are committed to maintaining exchange rate flexibility and limiting foreign exchange interventions to smoothing excessive volatility.

“Implementation of the resolution framework for financial institutions is critical for strengthening the financial sector’s resilience. Any changes to investment and foreign exchange limits of non-bank institutions should first carefully analyse growth and stability trade-offs and ensure that adequate supervisory capacity is in place.

“Structural reforms are critical to support a dynamic private sector that creates jobs. In this regard, efforts should be accelerated to divest underutilised public assets, upgrade procurement procedures, ease the development approval process, and foster financial inclusion,” Tao concluded.

However, he noted that the Jamaican authorities’ commitment to their IMF-supported programme remains strong more than four years after embarking on the difficult economic reforms.

“Programme performance is on track, and macroeconomic stability is entrenched, with stronger fiscal and external positions, subdued inflation, and employment at historic highs,” he also noted.

The 36-month SBA, comes with access to special drawing rights (SDR) 1,195.3 million (approximately US$ 1.68 billion), the equivalent of 312 per cent of Jamaica’s quota in the IMF, which was approved by the IMF’s executive board on November 11, 2016.

Yesterday’s executive board approval has made available an additional SDR 126 million (about US$180 million) to Jamaica, bringing the total accessible credit to about US$790 million. However, the Jamaican authorities continue to view the SBA as precautionary, and use it as an insurance policy against unforeseen external economic shocks beyond Jamaica’s control

The executive board’s review puts the final stamp of approval to the a preliminary agreement between the Government and the IMF mission team led by Uma Ramakrishnan, which visited Jamaica in early September.