Jamaica is on track to meet the conditions of its IMF stand-by agreement, a senior official said yesterday.
Gladstone Hutchinson, director of the Planning Institute, told Emerging Markets in Calgary that he was confident about the country’s ability to cover its fiscal needs.
He pointed to the $400 million raised in capital markets recently as a sign that there is confidence in the government.
A report from an IMF mission that visited Jamaica in February stated that “data for the December quarter indicates that the [fiscal year] 2010/11 fiscal programme remains broadly on track and international reserves are at comfortable levels. The structural reform agenda continues to progress steadily.”
The Fund agreed on a $1.27 billion 27-month Stand By Arrangement for Jamaica in February 2010.
Hutchinson said that while there are no problems with quantitative targets, there are some lingering fears about structural conditions.
“At its core, Jamaica and the Fund are concerned that the public sector will not be able to deliver continuously and effectively on the government’s public policy goals without going through modernization,” he said.
“We cannot afford to have a public sector that is not functioning efficiently.”
Hutchinson is one of the authors of a blueprint for structural change, with a public sector overhaul at its centre. This includes reducing the number of state ministries and agencies, and redirecting the role of the state.
One component would reduce to 12, from 38, the number of agencies that report to the prime minister’s office. The blueprint has been approved and Hutchinson expects implementation midway through this year.
There are, nevertheless, major questions about the economy’s ability to grow. The IMF projects growth for 2010/11 fiscal year at -0.5%. Hutchinson said this does not include the planned stimulus included in the structural blueprint, which includes investment in infrastructure and support for micro-enterprises, and said growth could reach 3%.
Alejandro Izquierdo, principal economist in the IDB’s Resource Department, said Jamaica, like other countries in the Caribbean “needs to watch public accounts and ensure fiscal solvency, because any kind of murmur could create fears among investors.”
Jamaican officials are aware of this, and also aware of other major issues cited by the World Economic Forum’s Global Competitiveness Report that are putting a strain on the country’s ability to perform.
Chief among these is crime, which Hutchinson said implies losses of between 5% and 7% of GDP each year. “We need to address crime,” he said. “All we need to do is look at the fact that no one runs a second shift, because of fear of crime, to know that the World Economic Forum numbers are true.”
There is a plan to invest $800 million over the next 10 years in 100 areas in the country with the most volatile crime situations.
Another major drain is caused by the island nation’s natural setting. The IMF pointed out, for example, that tropical storm Nicole, which hit the island in September, caused damage equivalent to 1.7% of GDP.
“We know we lose about 2% of GDP every time a major storm hits us, completely shutting down economic life. Our natural environment has no resilience, so we have to invest in drainage system, slope stability and river channels to improve this resilience,” said Hutchinson.