The Inter-American Development Bank (IDB) says institutional reforms initiated by the Government of Jamaica placed the country in a very strong position to respond to the economic and financial fallout resulting from the novel coronavirus (COVID-19) pandemic.
In its 2020 quarterly bulletin – ‘Report: Institutional Reforms and Infrastructure Crucial for Future Caribbean Growth’ – the IDB noted that the reforms enabled Jamaica to accumulate substantial cash buffers, equivalent to approximately four per cent of GDP, and a large reprogrammable primary fiscal surplus, prior to the onset of COVID-19.
Additionally, the Bank said cutting-edge policy frameworks grounded in flexibility, including a flexible foreign exchange rate and fiscal responsibility framework, have assisted in Jamaica’s adjustment to COVID-19 in a countercyclical manner.
The IDB said despite this strong progress, Jamaica still faces challenges relating to the economy’s structure and performance which underscore the need for ongoing reform.
The Bank pointed out that the country’s heavy reliance on tourism for economic activity and foreign exchange revenue highlights Jamaica’s “extreme susceptibility” to external shocks, as now obtains with COVID-19.
According to IDB data, Jamaica ranks 17th out of 166 countries on the composite Tourism Dependency Index, with the industry among those in the services sector accounting for approximately 72 per cent of GDP.
According to the Bank, structural and external vulnerabilities underscore the importance of institutional reform and capacity-building, noting that these are factors “most directly in the Government’s control.”
It pointed out that recent efforts to this end have shown “tremendous promise” and can support faster growth and greater resilience in the near-term.
The IDB said pivotal pillars of the institutional reform agenda, in which the Government has been proactively engaged, encompass prioritising key areas, such as education, health, infrastructure, and institutions of economic policy.
These include: strengthening tax administration to increase revenue collection and reduce evasion; bolstering public expenditure efficiency; and improving the public investment management capabilities of Ministries, Departments and Agencies to aid in economic recovery and accelerate long-term growth.