Senior IMF Official Says Jamaica Likely to Pass Upcoming Test

Unfolding preliminary macro-economic data suggests that Jamaica is likely to pass the upcoming International Monetary Fund (IMF) test, following the Fund’s review at the end of August.
This observation was made by Senior IMF representative to Jamaica, Dr. Gene Leon, during a recent presentation to the Jamaica Chamber of Commerce, in Kingston.
Dr. Leon noted that the overall fiscal deficit is smaller than projected in the budget, inflation is moderating, interest rates are trending downwards and Net International Reserves (NIR) are in a healthy position.
With respect to concerns that the re-valuation of the Jamaican dollar during the second quarter, while welcomed, will dampen export prospects, the IMF Executive argued that the recent appreciation in the exchange rate appears to be stabilising and could be regarded as a reflection of confidence in the country’s monetary policies.
Dr. Leon also pointed out that an analysis of international inflationary expectations suggested that there was no expectation of an international inflationary shock due to excess demand, with the US Federal Reserve indicating that current excess capacity meant inflation risks were “to the downside.”
With no excess demand for debt financing from the government and weak demand for loans from the private sector, interest rates are not expected to rise in the short term. However, Dr. Leon expressed some concern about the cost of capital, referring to the slow pace at which the commercial banks were reducing interest rate to the borrowers.
In relation to the IMF prescription for correcting the country’s balance of payments problem, for the first quarter (January to March 2010) current account, there was a surplus of just over US$1 million, Jamaica’s first current account surplus in six years.
Meanwhile, Minister of Finance and the Public Service, Hon. Audley Shaw, has emphasised that even as the Government has taken some bold steps and succeeded in stabilising the economy, growth must be the ultimate objective. “Now that we have economic stability, we have to go for growth. That is our priority and the significant feature going forward,” he said.
Addressing a group of influential financiers, business executives and investors at a business luncheon at the Reform Club in London earlier this week, the Minister said the main emphasis going forward will be on attracting new investments to the country, which will lay the foundation for economic growth.
The financiers, who included holders of Jamaican bonds on the European and global bond markets, expressed satisfaction with the government’s progress to date and lauded the Minister for the highly successful Jamaica Debt Exchange (JDX) initiative, which has brought about a significant reduction in the cost of the country’s debt servicing.
Mr. Shaw outlined several of the initiatives being pursued by his administration to ensure that Jamaica becomes more investment friendly, while challenging the guests to explore and seize the opportunities that exist in tourism, agriculture and agro-processing and other sectors in the economy. He also provided an update on the social and political situation in Jamaica, noting that the country was ripe for investment.