THE International Monetary Fund (IMF) has called on the Bank of Jamaica (BOJ) to ease its grip on the foreign exchange market, stating that this would create a more efficient financial system.

The recommendation comes amidst decades of careful control by the BOJ, which has actively bought or sold United States dollars to smooth out the Jamaican dollar’s movements. While this steadied prices, the IMF argues it prevents businesses from accessing deeper, cheaper foreign exchange.

“There is scope to deepen foreign exchange markets by reducing surrender requirements and scaling back the BOJ’s FXI (foreign exchange intervention),” the IMF said in its latest country report on Jamaica released Wednesday.

Since the start of the year, the BOJ has intervened 17 times in the foreign exchange market, selling US$470 million from its stock to smooth the pace of depreciation. That intervention has been crucial in stabilising the dollar around $161 to US$1 and has helped to cauterise imported inflation in past years.

Yet, the recommendation is not new. A similar call has been made in other country reports the IMF has produced after consulting Jamaican authorities. In its 2024 country report it also advised the BOJ to lower the requirement for authorised dealers/cambios to sell their foreign exchange to the central bank. The hope is that this would channel more reserves into private markets and incentivise private sector foreign exchange hedge products.

The IMF’s latest Article IV report, released Wednesday, comes as Jamaica continues to recover from the economic fallout of Hurricane Beryl and Tropical Storm Raphael, which contributed to a contraction in gross domestic product (GDP) for FY2024/25. Despite these shocks, the IMF praised Jamaica’s “enviable track record of investing in institutions and prioritising macroeconomic stability”, noting that the country’s policy frameworks have enabled “agile, prudent, and growth-supportive” responses to recent challenges.

The IMF acknowledged that the BOJ’s interventions have helped anchor inflation within the central bank’s four to six per cent target range and maintain stability in the foreign exchange market. Annual headline inflation stood at 5.3 per cent in April 2025, with core inflation at 4.4 per cent, both within target. International reserves remain strong, covering 7.2 months of imports, and the current account has posted surpluses for the past two fiscal years, supported by robust tourism revenues and high remittances.

However, the IMF warned that continued heavy intervention could limit the development of deeper, more efficient foreign exchange markets. “Implementing reforms to enhance the foreign exchange market and allow greater exchange rate flexibility would strengthen the transmission mechanism of monetary policy,” the fund noted. The IMF also reiterated its call for the BOJ to lower surrender requirements for authorised dealers and cambios, a recommendation first made in its 2024 country report, with the aim of channelling more reserves into private markets and incentivising private sector hedging products.

On monetary policy, the IMF supported the BOJ’s recent decision to reduce the policy rate to 5.75 per cent, describing the central bank’s approach as “cautious and data-dependent”. The fund stated that “there should be scope to lower the policy rate”, but cautioned that “heightened global uncertainties call for a cautious approach”, given risks from tighter global financial conditions, slower growth in key tourism markets, and potential trade disruptions.

The IMF further recommended that Jamaica maintain strong primary fiscal surpluses to reach the fiscal responsibility law’s (FRL) debt ceiling of 60 per cent of GDP by FY2027/28. It suggested “incorporating an explicit operational medium-term debt anchor in the FRL at a level below 60 per cent of GDP” to create additional buffers against future shocks.

Structural reforms remain a priority, with the IMF advising a multipronged approach to address “high crime, barriers to competition, poor educational outcomes, and inadequate infrastructure” as key constraints on growth. The fund welcomed recent progress on institutional reforms, including the operational launch of the Independent Fiscal Commission in January 2025, public financial management upgrades, wage bill reform, and steps toward adopting Basel III and unifying financial supervision under a “twin-peaks” regime.

The IMF concluded that while Jamaica’s policy frameworks provide resilience, “complementary reforms are needed to boost potential growth.”

The full staff report will be published imminently on the IMF’s Jamaica country page.