Sat | May 25, 2019

IMF urges Government to boost trust in state bodies

Published:Wednesday | April 24, 2019 | 12:33 AM

The International Monetary Fund (IMF) is encouraging Jamaica to take immediate steps to address public-sector governance shortcomings.

The IMF’s executive board made the call in its fifth review of Jamaica’s performance under the standby agreement, which was published on Monday.

It says the shortcomings could be addressed, in part, by empowering the Integrity Commission, passing regulations to solidify a transparent and competency-based process for board appointments to public bodies’ boards, and reducing the number of public bodies.

It said tackling governance issues swiftly and forcefully is necessary to enhance transparency and accountability, bolster trust in public institutions, and protect public funds.

The IMF also said Jamaica’s central bank should continue to reduce its footprint in the foreign exchange market, including limiting its forex sales to disorderly market conditions.

Further, the IMF says that the need for further reductions in reserve requirements should be assessed.

The Bank of Jamaica (BOJ) has been facing criticism over the pendulum-like shift in the value of the Jamaican dollar.

Last week, the BOJ intervened in the market by selling a total of US$40 million to help ease the fall in the value of the Jamaican dollar against the United States dollar.

The central bank encouraged businesses to utilise forward contracts with their financial institutions to minimise the risks that are associated with their foreign exchange obligations.

This, the BOJ said, is particularly relevant in an environment where the exchange rate moves in both directions.

Forex concerns

But, this did not stop criticisms from the parliamentary Opposition and the Private Sector Organisation of Jamaica (PSOJ).

The Opposition called for a review by the Government of the operation of the foreign exchange market and PSOJ President Howard Mitchell called for the abolition of the current foreign-exchange management programme and for the Jamaican dollar to be pegged to the US currency.

The report also said Jamaica’s public debt is projected to fall below 100 per cent of gross domestic product (GDP) for the first time in 18 years.

The last time this happened was in the 2000/01 financial year, the IMF noted.

The report also said unemployment is near all-time lows, business confidence is high, and international reserves are estimated to be comfortable under a more flexible exchange rate.