The First Reviews Pass: Jamaica Completes Its Opening IMF Milestones On Time and On Target

Three months into the Extended Fund Facility that had cost Jamaica years of painful preparation to obtain, the first evidence arrived that this programme might be different from its predecessors. The IMF completed its initial review on schedule, the government had met every performance criterion it had agreed to, and the multilateral disbursements that had been frozen since 2011 were flowing again. The pattern of compliance, begun so cautiously in May, was holding.

• First IMF EFF review completed; all performance criteria met by the government
• Multilateral disbursements from World Bank and IDB resume at scale
• Tax Administration Jamaica begins enforcement of reformed incentives regime
• EPOC publishes second quarterly compliance report confirming targets met
• Tourism arrivals grow strongly as summer season buoys north coast resorts
• Net international reserves strengthen as multilateral inflows resume

The completion of the first IMF review under the Extended Fund Facility was not, in itself, a dramatic event. IMF reviews are technical assessments — teams of economists examine the data, compare it to the programme targets, and issue a finding. But in Jamaica’s case, in the summer of 2013, the completion of a review on time and without a waiver carried a weight that was more than technical. The previous Stand-By Arrangement had broken down within twelve months of its approval, before its second full review had been completed. The government that had replaced the one that signed the SBA was now, under a different programme, demonstrating that the compliance failure of 2011 was not structural but circumstantial — that Jamaica was capable of meeting IMF conditionality when the political architecture around the programme was strong enough.

The structural benchmarks attached to the EFF were being addressed in sequence. The Tax Administration Jamaica, which had been substantially reorganised in the preceding years, began implementing the reforms agreed under the programme. The rationalisation of the incentives regime — which had seen Jamaica award tax waivers and concessions on a scale that significantly narrowed the revenue base — was underway. The changes were contentious: businesses that had built their models around legacy exemptions found the new framework more demanding. But the revenue implications were material and, as the quarter progressed, were beginning to appear in the government’s monthly fiscal accounts.

The net international reserve position, which had been under pressure in the programmatic vacuum of 2012, improved noticeably as multilateral inflows resumed. Bank of Jamaica data showed reserves climbing toward levels that provided more comfortable coverage of the country’s external obligations. The Jamaican dollar, which had faced intermittent pressure in the previous year, stabilised. Inflation, though still above the Bank of Jamaica’s medium-term target, was on a downward trajectory as the monetary policy framework was progressively tightened in line with the EFF’s requirements.

In the real economy, the third quarter of 2013 was seasonally buoyant for tourism. The summer months brought strong stopover arrivals from North America, and the north coast resort corridors reported solid occupancy rates. The Jamaica Tourist Board data, when compiled, would show that the sector was on track for modest annual growth. Construction was beginning to show more activity — partly driven by public infrastructure projects that the restored multilateral financing was beginning to support, and partly by private sector confidence that was, cautiously, beginning to return. Agriculture remained the weakest sector, still recovering from the combined pressures of drought conditions in previous seasons and the structural challenges that had long affected Jamaican farming.

What This Means

Three months into the programme, the most significant thing that had happened was what had not happened: there had been no slippage, no waiver request, no emergency discussion about a missed target. In Jamaica’s history with the IMF, that was more unusual than it might seem. The country had a long record of programmes that began well and deteriorated under the pressure of political cycles, labour disputes, or revenue shortfalls. The combination of the Partnership for Jamaica Agreement, EPOC’s public monitoring, and the memory of what had happened to the SBA when it broke down all created incentives for compliance that had not existed in the same form before.

For Jamaicans experiencing the programme on the ground, the picture was still difficult. Wages were constrained. Public services were operating under tight budgets. The social contract around austerity was holding, but it was holding partly because everyone involved understood the alternative. The EPOC reports gave the public a window into the government’s performance that previous programmes had not provided. Whether that transparency would continue to serve its intended purpose as the programme’s demands intensified in later years remained to be seen.

The Road Ahead

With the first review complete, the second was already being prepared. The quarterly cycle of the EFF was unrelenting: there would be fifteen more reviews before the programme concluded, each one requiring the government to demonstrate that the targets were being met and the structural benchmarks were being addressed. The hardest reviews were expected to come in years two and three, when the tax reform had to deliver its revenue projections and the public sector wage agreement had to survive the pressures of another round of negotiations. For the moment, in the summer of 2013, Jamaica had something it had not had in a very long time: a credible, on-track programme and a realistic path to fiscal stabilisation. The task was to keep it.

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