Private Sector And Gov’t Work To Protect IMF Deal
Sections of the private sector remain sceptical about the chances of success of Jamaica’s 48-month extended fund facility (EFF) with the International Monetary Fund (IMF), despite confirmation that policy implementation was strong in the first quarter of the programme.
The Economic Programme Oversight Committee (EPOC), in a communiqué issued following a meeting on Wednesday, said that in discussions with IMF and government officials, members expressed concern that economic growth continued to elude Jamaica.
“Of added concern for the members was the indication that despite the promising start, sections of the private sector remain sceptical about the EFF’s chances of success,” read a section of the communiqué.
“This doubt is borne out of the previous failed IMF programme as well as the magnitude of the challenges Jamaica faces,” said the statement issued by the non-public-sector members of the committee, co-chaired by Bank of Jamaica Governor Brian Wynter and Sagicor Life Jamaica President Richard Byles.
NEED FOR POSITIVE COMMUNICATION
To address the problem, the EPOC said it believed that strong positive communication from both the Government and the private sector would be critical “if we are not to fall prey to these fears”.
Such communication “must encourage, facilitate and point the way to greater investment by domestic capital”, the committee added.
The EPOC met on Wednesday and received information on the performance of key economic indicators of the economy for July 2013 and the commitments under the EFF through August 2013.
It reported that for the four months to July, the economy remained on target with key indicators and, in some cases, surpassed the budgeted target – in particular, the primary surplus and the public-sector balance.
Those out-turns were driven mostly by good revenue collection and less-than-projected expenditure, said the committee, noting that the target for the Net International Reserves (NIR) was also met.
The EPOC indicated that the primary balance of central Government for the review period was $25.1 billion, just over 18 per cent or $4.6 billion more than budgeted. Actual tax revenues of $108.6 billion exceeded the budgeted $107.9 billion by $700 million, while the NIR stood at US$933 million in July.
An IMF team, which conducted the first-quarter review under the EFF, confirmed that the overall policy implementation of the programme was strong and that structural reforms were progressing as expected.
But the EPOC said: “Even as we congratulate the Government for this performance, we urge them to not become complacent. Great discipline and prudence need to be exercised every quarter, through to the end of the programme.”
For the September quarter, the programme requires that the Government achieve 16 commitments, three of which are structural benchmarks – the Government’s presentation of a proposal for the design of a fiscal rule, and tabling in Parliament the Charities Bill and Omnibus Tax Incentive Bill by the end of September.
The two bills are the continuation of a process of fundamental tax reform intended to broaden the tax base, simplify the tax system, and reduce tax rates and economic distortions, while supporting growth.
The EPOC said the Government has already significantly reduced discretionary waivers and reduced the standard General Consumption Tax rate by one percentage point. The fiscal rule proposal has been submitted to the IMF team, and the Government indicates that it is currently on track to meet the other commitments.