THE International Monetary Fund (IMF) continues to lavish praise on Jamaican authorities for the work that is being done to improve economic conditions on the island, but warned that it could be undone by ongoing geopolitical tensions elsewhere in the world and climate-related events. The praise and warning were contained in the IMF’s latest assessment of Jamaica’s economy — the so-called Article IV Consultations — and the second review of the progress made to date under the Resilience and Sustainability Facility (RSF) and the Precautionary and Liquidity Line (PLL) agreements.

“The outlook points to sustained growth and inflation falling within the Bank of Jamaica’s target range amid sound external and fiscal positions and financial system stability. Nonetheless, global risks remain high,” the IMF wrote in its release on Wednesday. It said growth is projected at 1.7 per cent for the current fiscal year which ends on March 31, with tourism now well above pre-pandemic levels and unemployment at historic lows.

Still, the IMF points to issues such as growing risk aversion, regional conflicts, increased commodity prices and climate-related activities, which it said could sap the growth momentum and prods the Government to take action to mitigate the risks.

“Going forward, continued efforts to build resilience to global shocks through prudent policies and reforms to tackle supply-side constraints and raise productivity can further unleash Jamaica’s potential and foster inclusive growth over the medium term,” it said.

Turning specifically to climate-related risks to growth, the fund pointed to some recent reforms including “steps to establish a natural disaster reserve fund, strengthen climate-related elements in public investment management, and enhance the climate risks assessment in the financial system to embed these risks into supervisory activities.”

For consumers, the IMF assessment was stark on the inflation side, largely reflecting Bank of Jamaica (BOJ) projections that price increases will be higher for longer than originally thought, with expectations that price increases will average 7 per cent by the end of the current fiscal year before dipping to 5 per cent over the 12 months to March 31, 2025. The BOJ’s stance to ensure that its decisions are data-dependent was also noted with the fund stating it “is warranted given upside risks to inflation stemming from demand pressures, tight labour markets, and deepening geoeconomic fragmentation.”

While supporting the wage bill reform, which would standardise pay structures and help retain skilled workers, the IMF also emphasised the need to avoid crowding out priority non-wage expenditures and to continue to improve public financial management and expenditure efficiency.

Progress on adopting Basel III standards which requires financial institutions to boost their resilience by increasing their minimum capital was also highlighted, and efforts to give BOJ supervisory oversight of the entire financial sector were noted as a step in the right direction.

“They commended decisive steps addressing deficiencies in the AML/CFT framework and encouraged the authorities to build on this progress. Directors encouraged further efforts to deepen FX markets and noted the central bank’s efforts to expand digital currency use. Directors advocated reforms to foster productivity and build resilience to shocks, including steps to improve competition and resource allocation, strengthen education and training, upgrade infrastructure, reduce crime and barriers to trade, and close gender gaps. Social policies could benefit from enhanced targeting. Improving data availability will benefit evidence-based policymaking. Directors encouraged progress on the climate agenda to build resilience, transition to renewables, prepare the financial system to monitor risks, and catalyse climate financing.”