Jamaica set to pass next IMF test

KINGSTON, Jamaica: Preliminary economic data suggests that Jamaica is likely to pass the upcoming International Monetary Fund (IMF) test, following the Fund’s review at the end of this month.

The test will be the second Jamaica has had to pass since signing an agreement with the IMF for a US$1.27 billion loan in February.

Senior IMF representative to Jamaica, Dr. Gene Leon, during a recent presentation to the Jamaica Chamber of Commerce said the overall fiscal deficit is smaller than projected in the budget, inflation is moderating, interest rates are trending downwards and net international reserves are in a healthy position.

Addressing concerns that the revaluation of the Jamaican dollar during the second quarter will dampen export prospects, Dr. Leon said the recent appreciation in the exchange rate appears to be stabilizing and could be regarded as a reflection of confidence in the country’s monetary policies.

Leon said that an analysis of international inflationary expectations suggested that there was no expectation of an international inflationary shock due to excess demand, with the U.S. Federal Reserve indicating that current excess capacity meant inflation risks were “to the downside”.

With no excess demand for debt financing from the government and weak demand for loans from the private sector, interest rates are not expected to rise in the short term. However, Leon expressed concern about the cost of capital, referring to the slow pace at which commercial banks were reducing interest rates to borrowers.

After Jamaica passed the first test in May, targets were tweaked and benchmarks added. The results of the latest review will be released later this month.

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