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JAMAICA | IMF not happy with island's poor 5-year growth rate

Featured JAMAICA | IMF not happy with island's poor 5-year growth rate
MONTEGO BAY, March 9, 2018 - The International Monetary Fund says despite the considerable progress that Jamaica has been made on macroeconomic policies and outcomes, It is disappointed with the island’s poor economic growth which has averaged only 0.9% since the reforms beganin May 2013.

The IMF staff concluding statement of the 2018 Article IV and third review under the Stand-By Arrangement, said “ Entrenched structural obstacles, including crime, bureaucratic processes, insufficient labor force skills, and poor access to finance, continue to hinder productivity and growth.”

In addition, the IMF says “the agricultural sector’s vulnerability to weather shocks exacerbated rural poverty in 2015.”

The statement warned that the government’s continued failure to address these bottlenecks “could pose risks for continued public support for the government’s policy program.”

The IMF said, “Improving social outcomes and fostering inclusive growth will require addressing structural bottlenecks and creating an enabling environment for the private sector.” In addition the international lending agency advised that “Countering both weak social outcomes and escalating crime will take time, but will be essential for sustained growth.”

The IMF however recommended, that “early childhood education, interventions to improve school attendance, and skills training for the youth would foster a virtuous cycle of lower crime, higher wages, stronger growth, and increased economic opportunity, particularly for the young. Policies to support productive private investments, including improving lending to smaller businesses and reducing lending-deposit interest spreads, will help fuel such an upswing.”

The lending agency cautioned that the Jamaican government to “resist the pressure to use scarce public resources to “pick winners” (including through providing tax incentives). Instead, the goal should be a uniform, broad-based, and low rate tax system, a level playing field for business, and harmonized rules for all.”

The IMF told the government “more expenditure is needed for infrastructure, citizen security, building agricultural resilience, health, education, and the social safety net. Creating the space for such spending will require going beyond temporary remedies like wage freezes and adjustments to non-wage benefits.”

The international lending and oversignt agency advised “It will require high-quality measures to (i) overhaul the compensation structure to retain skills and reward performance, (ii) streamline the vast and inequitable allowances structure, (iii) prioritize key government functions and shed those activities that the government can no longer afford to undertake, and (iv) change the capital-labor mix through technology upgrades, including a better monitoring of (and accountability for) government spending.

“Inevitably, these reforms will also lead to a reduction in the size of the public workforce. Such a holistic approach will support a durable reduction in the wage bill, without frequent discordant wage negotiations, and enhance public service delivery with fewer but better paid public employees,” the IMF declared.

Last modified onFriday, 09 March 2018 17:02
  • Countries: Jamaica