It seems a step has been made towards Jamaica reaching an agreement with the International Monetary Fund. The head of an IMF mission wrapping up a trip to Jamaica, Jan Kees Martijn, says it has made “significant progress” in reaching understandings on strengthening Jamaica’s macroeconomic policies.
These include achieving higher primary fiscal surpluses, and “structural reforms that can pave the way for private-sector led growth” while addressing social protection for the most vulnerable.
The Fund welcomed a debt exchange announced by the Jamaican prime minister Portia Simpson-Miller and finance minister Peter Phillips, to address the country’s domestic debt. A similar swap had been initiated by the former Bruce Golding Jamaica Labour Party (JLP) administration under a plan with the fund that collapsed more than a year ago.
The country has been grappling with means to get the agreement with the fund back on track, but the harsh measures needed have been avoided by the former JLP administration, and Simpson-Miller’s People’s National Party (PNP) which won a general election with promises to fix the economy.
The following is the full text of Martijn’s statement issued Tuesday (Feb 12) in Kingston:
“Over the last three decades, the Jamaican economy has experienced very low economic growth, declining productivity, and reduced international competitiveness. An important factor behind these problems has been Jamaica’s unsustainable debt burden, which has undermined confidence and elevated risks to economic stability. Additionally, Jamaica’s high debt service has limited the government’s potential to provide the services needed to achieve sustained rates of growth and increased welfare for its citizens.
“The IMF mission continues to work assiduously with the Jamaican authorities on an economic program that can help address these challenges and can be supported under a Fund arrangement. We have made significant progress in reaching key understandings on strengthening macroeconomic policies, including through achieving and sustaining higher primary fiscal surpluses, which can help underpin debt sustainability; on structural reforms that can pave the way for private-sector led growth; and on social protection for the most vulnerable.
“With regard to fiscal policies in particular, Fund staff have been working closely with the government and its advisors in exploring policy options that can help achieve a substantial reduction in debt, while promoting sustained growth. It will be necessary to reduce the debt by a very sizeable amount from current levels to restore debt and external sustainability. The targeted reduction will require significant fiscal consolidation as well as measures to reduce the debt burden upfront, given the magnitude of the task. In addition, the structural impediments to growth—including the excessive debt burden—need to be addressed with urgency, to lay the foundation for a sustained recovery in economic fundamentals. In that regard, a key challenge is how to balance trade-offs among these key objectives, within a specified time horizon.
“The mission welcomes the debt exchange announced by the Jamaican authorities for their domestic debt, which is an important element aimed at helping to put public debt firmly on a downward trajectory, reduce the stock of debt, and provide fiscal space for other needed government initiatives. In that regard, a successful debt exchange will require high participation from creditors to help secure financing assurances for a Fund-supported program.”