WASHINGTON, United States (CMC) — The International Monetary Fund (IMF) says Jamaica’s implementation of the US$1.66 billion Stand-By Arrangement (SBA) remains strong, five years after the country began the task of reforming its economy.

The IMF executive board, which has completed the fourth review under the SBA, said nonetheless that structural impediments need to be quickly addressed to foster private capital formation and accelerate growth and job creation. It also called on the government to ensure that the public sector wage bill is placed on a downward path.

It said modernising the Bank of Jamaica, (BoJ), the island’s central bank, will help facilitate the needed move to full-fledged inflation targeting.

The Washington-based financial institution said that Jamaica continues to view the SBA as precautionary, an insurance policy against unforeseen economic shocks that could lead to a balance of payments need.

IMF Deputy Managing Director, Tao Zhang, who served as the acting chair of the board review meeting, said that the Jamaican authorities continue their impressive track record under the SBA.

He said macroeconomic stability is entrenched, with reduced public debt and improving social and unemployment indicators, growth remains subdued.

“Against this backdrop, supply-side reforms to facilitate private sector investment are needed to achieve higher, sustained growth and job creation.”

Zhang said that the BoJ remains committed to maintaining inflation within the 4-6 per cent target range over the medium term.

He said the recent tabling in Parliament of legislation to upgrade the BoJ Act is an important step toward the eventual shift toward full-fledged inflation targeting.

“Maintaining exchange rate flexibility and limiting FX (foreign exchange) sales during periods of disorderly market conditions is necessary to support an inflation targeting framework. The authorities are also planning to accelerate FX market development and the building of technical capacity in monetary operations,” he said.

The IMF official said the public-sector wage bill needs to be placed on a sustained downward path. “Reduced wage outlays will allow the government to reprioritize public spending toward security, social assistance, and growth-enhancing capital expenditure.

“Achieving such a wage bill reduction will require a broad overhaul of the public compensation and allowance system and a reduction in the size of the government workforce,” he said.

Zhang said the financial sector should be further strengthened in line with the recommendations from the accompanying Financial Sector Stability Assessment.

“Priority should be placed on enhancing coordination, data collection, monitoring, and strengthening technical capacity of the financial regulators. Improving consolidated and risk-based supervision are important reform areas.

“Addressing impediments that constrain access to finance would help support private-sector investment,” Zhang said.