Minister of Finance and the Public Service, Hon. Audley Shaw, gave the following review and update of the IMF Stand-By Arrangement (SBA) during a Press Briefing at his Ministry Tuesday (May 18), at which the IMF confirmed that Jamaica’s performance, up to March 31, 2010 was better than anticipated.
Minister of Finance and the Public Service, the Hon Audley Shaw
Over the past 10 days, the IMF team has been revising the performance under the economic programme described in the Government of Jamaica’s (GOJ’s) Letter of Intent of January 15, 2010.
I am pleased to announce that the performance to the end of March 2010 has been better than expected.
The domestic debt exchange launched in early January was successful, with a higher than expected participation rate, which yielded larger than anticipated savings on the government’s interest bill.
In the period following the debt exchange, credit rating agencies upgraded Jamaica’s sovereign debt rating, Eurobond prices on sovereign bonds have rallied, and the treasury bill rates have fallen to around 10 per cent, the lowest levels seen since 1982. Furthermore, the income and valuation losses related to the debt exchange appear to have been smoothly absorbed by financial institutions.
There have not been any reports of entities facing capital or liquidity shortages which would have required access to the Financial System Support Fund (FSSF).
One private sector source anticipates that by next year, interest rates will be the lowest since 1972.
In light of these developments, the GOJ is pleased to report that performance under the IMF Stand-By Arrangement (SBA) is on track. The relative market stability in the period following the approval of the SBA contributed to the achievement of quantitative performance criteria on net international reserves and net domestic assets of the Bank of Jamaica with margins. As regards fiscal performance, all quantitative targets have also been met.
Additionally, the structural reform agenda is advancing and key structural benchmarks have been achieved, including:Parliamentary approval of a Fiscal Responsibility Framework (FRF) in March 2010;The preparation of a draft concept paper for an omnibus banking law and reforms to enhance financial sector oversight;And the divestment of Air Jamaica.
And on the horizon critical targets to be met include a Review of Tax Waivers to be completed by December, as well as ongoing work in the Transformation of the Public Sector.
Notwithstanding these benign results, vigilance will be required to ensure that the objectives under the SBA are achieved. Indeed, the global economic environment is uncertain and prospects for economic growth, although improved, are still weak.
The GOJ remains deeply committed to macroeconomic stability and the implementation of the reform pillars outlined in the Memorandum of Economic and Financial Policies (MEFP) accompanying the LOI of January 15, 2010, that endeavour to fundamentally transform the Jamaican economy.
The GOJ strongly believes that the policies described in the MEFP are adequate to achieve the programme’s objectives. However, if necessary, the Government stands ready to take any additional measures that may be required.
The Government will maintain the productive and fruitful dialogue it has enjoyed with the IMF. In this spirit of cooperation, the Government will consult with the Fund on the adoption of these measures and in advance of revisions to the policies contained in the MEFP, in accordance with the Fund’s policies on such consultation.
As part of its communication policy, the GOJ intends to publish the updated LOI, once it has been finalised on the websites of the Ministry of Finance and the Public Service and the Bank of Jamaica, to keep domestic and international agents informed about its policy actions and intentions.