- Significant implementation of the government’s Economic Reform Programme (ERP) dominated activities undertaken by the Ministry of Finance and Planning during 2013.
- Jamaica’s qualification for IMF funding support necessitated government’s implementation of several prior conditions, as agreed on with the IMF.
- The government’s implementation of measures under the ERP led to Jamaica passing the first EFF quarterly review, conducted by the IMF Staff Mission Team.
Significant implementation of the government’s Economic Reform Programme (ERP), leading to a new four-year agreement with the International Monetary Fund (IMF), dominated activities undertaken by the Ministry of Finance and Planning during 2013.
The ERP’s provisions are consistent with the administration’s strategic priority focus on attaining fiscal prudence and a credible economic programme. It aims to spur economic growth, reduce public debt, maintain the country’s balance of payments schedule, and enhance the island’s global market competitiveness.
The programme is also central to the four-year Memorandum of Economic and Fiscal Policies (MEFP), which charts the extent of funding support, framed under a US$958 million Extended Fund Facility (EFF), which the EMF’s Executive Board approved for Jamaica, in May.
Overall, the ERP aims to, among other things: reduce Jamaica’s debt from 145 per cent of the gross domestic product (GDP), to 96 per cent by 2020; attain a 7.5 per cent primary budgetary surplus target; and expenditure containment, inclusive of public sector salary restructuring to reduce the ratio to GDP from 10.6 per cent, as at March 31, 2013, to nine per cent by fiscal year 2015/16.
Its implementation is being partly overseen by a Ministry-appointed Economic Programme Oversight Committee (EPOC), co-chaired by Bank of Jamaica (BoJ) Governor, Brian Wynter, and Sagicor Life Jamaica Limited President and Chief Executive Officer, Richard Byles.
Jamaica’s qualification for IMF funding support necessitated government’s implementation of several prior conditions, as agreed on with the IMF, which commenced in 2012 and continued in 2013.
These included passage of several legislations in the Houses of Parliament, which were piloted by Finance and Planning Minister, Dr. the Hon. Peter Phillips.
These included: the Public Debt Management Bill; and Revenue Administration Amendment Act.
Other activities undertaken included: implementation of a National Debt Exchange (NDX), which yielded $17 billion in interest payment savings, following a 99 per cent stakeholder participation; a wage restraint agreement between the government and unions representing public sector employees, with civil servants foregoing salary increases over the next three years; and tabling of the 2013/14 budget, consistent with the 7.5 per cent primary surplus target, in April.
Finance and Planning Year in Review Audio
Extended Fund Facility
Consequent on the Government’s attainment of these targets, the IMF’s Executive Board considered Jamaica’s application and, based on the report of its Staff Mission Team to Jamaica, approved a US$958 million four-year Extended Fund Facility (EFF) for the country in May. This entitled Jamaica to an initial
US$207.2 million draw down. The EFF has also unlock complementary funding support, totaling upwards of $900 million in loan and grant support from the European Union, World Bank, and Inter-American Development Bank (IDB).
Success of First Quarter Review – April to June
The government’s implementation of measures under the ERP led to Jamaica passing the first EFF quarterly review, conducted by the IMF Staff Mission Team. This resulted in Jamaica being granted a second drawdown of US$30.6 million from the IMF to bring total disbursements under the EFF to approximately US$240.4 million.
The measures implemented included: tabling of the 2013/14 budget, consistent with the 7.5 per cent primary surplus target in April; passage of the Revenue Administration Amendment Act, which promotes sector stakeholder compliance in relation to statutory obligations; completion and rolling out of a Central Treasury Management System (CTMS), which resulted in substantial savings to the Consolidated Fund; commencement of public sector transformation, which included Jamaica Customs being changed to an Executive Agency; Parliament’s commencement of the debate on pension reform in relation to the Pensions (Superannuation Funds and Retirement Schemes) (Validation and Amendment) Act.
Success of Second Quarter Review – July to September
Timely execution of the ERP during the July to September quarter resulted in the IMF Board’s approval of a third drawdown of another US$30 million under the EFF. The country’s performance has also put it in good stead for complementary funding support of approximately US$270 million from the World Bank and Inter-American Development Bank (IDB). The IMF Staff Mission team reported that the country recorded economic growth of just under one per cent over the period.
Additional Support Funding
Between September and October, the Government signed agreements with the European Union (EU) and the Inter-American Development Bank (IDB) for grant and loan support for Jamaica’s economic programme.
In September, the administration received €7 million in budgetary support from the EU, which will assist in the implementation of various development programmes. The following month, the administration concluded a US$60 million IDB loan agreement, signed by Finance and Planning Minister, Dr. the Hon. Peter Phillips, and the Bank’s President, Luis Alberto Moreno, in Washington, D.C.
The loan is the third tranche of financing for the Public Financial and Performance Management Programme, and is aimed at strengthening fiscal discipline, improving public financial management, and boosting public performance management.
Legislation to support ERP
With tax reform being a key element in the ERP’s implementation, Dr. Phillips piloted the Omnibus Tax Incentive Legislation in the House of Representatives, where it was debated and passed. It was also approved in the Senate.
The legislation, development of which was largely done by a Ministry appointed Incentives Working Group, comprising private and public sector stakeholders, seeks to establish a transparent and coherent regime to govern all tax incentives.
The Legislation comprises the Fiscal Incentives (Miscellaneous Provisions) Act 2013, which outlines reforms to the corporate tax structure, including introduction of an Employment Tax Credit (ETC); changes to the capital allowance regime; revision of provisions governing the utilisation of tax losses; and “grandfathering” and transitional arrangements relating to change from the old to the new incentives regime.
It also includes the Income Tax Relief (Large Scale Projects and Pioneer Industries) Act 2013, which designates large scale projects and pioneer industries that would qualify for tax credit under the Income Tax Act. Other elements approved under the Omnibus Regime are the (Customs Tariff (Revision) (Amendment) Resolution 2013 and Stamp Duty (Amendments of Schedule) Order 2013.
These provisions support a policy of granting waivers to the primary inputs integral to the production of goods and services.
Public Expenditure Containment
Efforts at public expenditure containment and, ultimately national debt reduction are being pursued through the divestment/privatization of key State entities, deemed necessary to enhance the country’s financial security, while improving their outputs.
These entities include: Wallenford Coffee Company has been sold to AIC International Investments Limited, in a deal worth approximately $4 billion. For Kingston Container Terminal, three entities – DP World, PSA International, and Terminal Link Consortium – have been short-listed for consideration in the State entity’s proposed privatization.
Enterprise Teams have also been appointed to oversee privatization of the Norman Manley International Airport, Jamaica Railway Corporation, and Caymanas Track Limited.
Focus on economic growth is also being facilitated at the sectoral level, particularly among micro, small and medium size enterprise (MSME) stakeholders. To this end, the Development Bank of Jamaica (DBJ) allocated some $2 billion to facilitate expansion of this sector. To date, upwards of $1 billion of the sum has already been disbursed.
The DBJ also announced plans to launch the Jamaica Venture Capital Programme within the first half of the 2014/15 fiscal year, which commences on April 1, 2014. This initiative is a joint undertaking with the IDB, and aims to provide readily accessible funding options to MSMEs.
Several major projects deemed central to advancing economic growth, are also being undertaken and are at various stages of implementation. These include: the North/South Highway, which will link the northern and southern sides of the island; the Logistics Hub Initiative, which seeks to position Jamaica as the fourth node in the global logistics trade chain; and the Agro-Parks project, which entails development of nine such facilities aimed at maximizing agricultural outputs and reducing the country’s food import bill, which averages nearly US$1 billion annually.
Dr. Phillips has, on several occasions, emphasized the need for steadfast commitment by the nation to all efforts necessary to see Jamaica through the current challenges, in order to spur growth, reduce the debt, and restore confidence in the country, thereby enhancing its global competitiveness.