The International Monetary Fund (IMF) says Jamaica’s improved economic growth during the fiscal year 2018-19 was buoyed by construction and mining, and urged the authorities to put in place “strong institutions” to entrench the hard-earned gains from the economic reforms.

An IMF delegation, headed by Uma Ramakrishnan, ended a five-day visit to the island on Friday last ahead of the sixth and final review under the US$1.6-billion 36-month Stand-By Agreement (SBA) planned for September.

A statement from the IMF said the team took stock of progress on Jamaica’s economic reform programme supported by the IMF’s precautionary SBA.

Ramakrishnan said that unemployment is now at an all-time low of eight per cent and that the inflation out-turn was 3.9 per cent in April, closer to the Bank of Jamaica’s (BOJ) target range of four to six per cent.

She said the primary surplus was almost 7.5 per cent of gross domestic product (GDP) in the financial year 2018/19, with public debt falling to about 95 per cent of GDP at the end of March 2019 — the lowest since financial year 2000/01, while, non-borrowed reserves were US$430 million above target at end-March 2019, providing a critical buffer against unforeseen global economic shocks.

“The IMF team welcomes the recent BOJ’s accommodative policies aimed at restoring inflation to the target range. The reduction in the cash reserve requirement by five points this year and the successive policy rate cuts to 0.75 per cent should support private credit expansion as the Government continues to deleverage.”

But Ramakrishnan said enhanced central bank supervision and risk management practices at lending institutions will be critical to ensure careful assessment of risks to maintain financial stability.

“Meanwhile, the financial year 2019/20 budget execution is underpinned by continued buoyant tax collections in April and above-budget capital expenditure — an encouraging new normal for Jamaica.

“Consistent with the overall objective of reducing its footprint in the foreign exchange (FX) market and promoting interbank market development, the BOJ should limit its FX interventions to episodes of significant market dislocations.

“At the same time, continued swings in the currency highlight the urgency to adopt an FX trading platform to enhance market transparency and price discovery, and develop FX-hedging instruments,” Ramakrishnan said.

Looking ahead, the IMF official stated that having strong institutions in place will be critical to entrench the hard-earned gains from the economic reforms.

“In this regard, the GOJ’s commitments to enacting amendments to the BOJ Act to adopt a full-fledged inflation-targeting framework, creating a policy framework for natural disasters risk financing, and tabling legislation for the establishment of an independent fiscal council are important next steps.

“Strengthening efforts to enhance the special resolution regime and consolidated supervision of financial conglomerates — as recommended by the recent IMF Financial Sector Assessment Programme (FSAP) — are also critical. These actions require strong coordination among the BOJ and the Financial Services Commission (FSC).”

Ramakrishnan said the IMF team also reiterated the need to institute a new streamlined and performance-based compensation framework for government employees before the next round of wage negotiations.

“This reform will ultimately lead to a more cost-effective and efficient public sector. The IMF team welcomes the open and transparent process for selection of the new governor of the Bank of Jamaica,” she said, adding “we would like to thank the Jamaican authorities for their continued hospitality and frank discussions.”