Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultationwith Jamaica.
Over the past few years, Jamaica has been buffeted by a difficult global environment—from COVID, the war in Ukraine, and the ongoing tightening of global financial conditions. Supported by sound policy frameworks and policies prioritizing macroeconomic stability, the economy is now recovering strongly. As COVID waned, stopover flight arrivals had rebounded to pre-crisis levels, and 2022 real GDP growth is expected to be around 4 percent. Pushed by global factors—in particular, the impact of the war in Ukraine on commodity prices—inflation has risen above the central bank’s target band but is expected to decline during the course of 2023. High commodity prices have resulted in an increase in the current account deficit. However, international reserves remain at healthy levels. The financial system is well-capitalized and liquid.
The outlook points to a continued recovery in activity and inflation falling back within the Bank of Jamaica’s target range by end-2023. Nonetheless, global risks remain high. The war in Ukraine may push commodity prices higher, a stronger-than-envisaged tightening of global financial conditions may curb capital flows and reduce remittances, and new COVID variants could disrupt tourism and trade. The authorities’ response to recent shocks has been well designed. The fiscal policy response to COVID was nimble, supporting the economy in 2020 but then quickly resuming a downward path for the debt as the impact of the pandemic faded. Similarly, the response to the upward surge in fuel and food prices was to allow for full pass-through while providing targeted support to the poor within the existing fiscal envelope. The Bank of Jamaica has followed a data dependent tightening of monetary policy to counter the inflationary impulse arising from the rapid recovery in demand and increases in global prices. These policies have struck the right balance in responding to shocks, protecting the vulnerable, countering inflationary pressures, and further securing debt sustainability.
Executive Board Assessment
Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities’ strong track record of building institutions and prioritizing macroeconomic stability, which together with a nimble and prudent policy response helped Jamaica navigate successfully the pandemic and other recent global shocks. Directors noted that the continued recovery faces elevated uncertainty and risks from higher commodity prices, tighter-than-envisaged global financial conditions, new COVID outbreaks, and natural disasters.
Directors agreed that maintaining the planned path of primary balances coupled with continued data-dependent monetary policy tightening should further enhance debt sustainability, curb inflation, and create fiscal space to respond to future shocks. This prudent fiscal envelope should also identify resources for climate-resilient infrastructure, investments in health, security, and education. Directors also welcomed continued improvement of the fiscal policy framework, including strengthening tax and customs administration and public financial management systems, the recently established Fiscal Commission, and reforms of the wage structure to simplify the system and reward performance.
Directors supported ongoing reforms strengthening financial stability by adopting Basel III regulatory standards and bolstering supervision. They emphasized the need to enhance crisis management and consolidated supervision, and strongly encouraged the authorities to step up efforts to improve the AML/CFT framework in line with the action plan agreed with FATF. Directors also called for further efforts to deepen FX markets and refine the macroprudential framework. They took note of the nascent benefits for financial inclusion of central bank digital currency adoption, while stressing the need to manage possible risks.
Directors encouraged a multipronged approach to overcome constraints to growth. They stressed the need to strengthen education and training, upgrade infrastructure, digitalization of government services, reduce crime and barriers to trade. Social inclusion will benefit from the strengthened cash transfer program. Evidence-based policymaking would benefit from improved data quality and timeliness leading to subscription to the SDDS.
Directors encouraged reforms alleviating climate change challenges and long-term vulnerabilities. These reforms should strengthen physical and fiscal resilience, incentivize renewable energy generation, reduce energy consumption, develop markets for “green” financial instruments, and ensure proper recognition and management of climate risks. Reduced climate vulnerability would help catalyze private sector financing for climate-related investments. Directors looked forward to continued and enhanced collaboration with other international organizations to support these efforts.
Jamaica: Selected Economic Indicators
Population (2019): 2.73 million
Per capita GDP (2019): US$5729
Quota (current; millions SDRs/% of total): 382.9/0.08%
Literacy rate (2015)/Poverty rate (2017): 87%/12.6%
Main products and exports: Alumina, tourism, chemicals, mineral fuels,
Unemployment rate (July 2022): 6.6%
bauxite, coffee, sugar
Key export markets: U.S., U.K., Canada
Real GDP growth (%)
Unemployment (%) 1/
Inflation, end of period (%)
Inflation, average (%)
Central government finances 2/
Budgetary revenue (% of GDP)
Budgetary expenditure (% of GDP)
Budget balance (% of GDP)
Of which: central government primary balance
Public entities balance (% of GDP)
Public sector balance (% of GDP)
Public debt (% of GDP)
Money and credit
Broad money (% of GDP)
Credit to the private sector (% of GDP)
Treasury bill rate, end-of-period (%)
Treasury bill rate, average (%)
Balance of payments
Current account (% of GDP)
FDI, net (% of GDP)
Gross international reserves (weeks of imports)
External debt (% of GDP)
End-of-period REER (appreciation +) (INS)
Sources: Jamaican authorities; UNDP Human Development Report; Information Notice System; and Fund staff estimates and projections.
1/ As of January in each period.
2/ Fiscal years run from April 1 to March 31. Authorities’ budgets presented according to IMF definitions.