IFC: Jamaica beats gloomy post-hurricane financial forecasts but faces growing risks

Jamaica's economy proved more resilient than post-hurricane projections suggested, but faces elevated and widening risks that demand urgent response, the Independent Fiscal Commission (IFC), the country’s finance watchdog, has warned. 

Despite the “monumental economic shock” from Hurricane Melissa, which struck in October and caused an estimated $2 trillion in damage and losses equivalent to 56.7 per cent of 2024 GDP, Jamaica’s macroeconomic pillars “remain sound”, it said in a statement. The storm also triggered the suspension of the fiscal rules. 

The IFC made the comments in a statement Wednesday, following yesterday’s tabling of its Statement on Fiscal Performance for fiscal year 2025-2026, which ended on March 31, in the House of Representatives. 

The IFC said headline inflation stood at 4.3 per cent at end-March 2026, well below post-Melissa projections of 10 per cent and 5.7 per cent made in January and February, respectively, and comfortably within the Bank of Jamaica's 4.0 to 6.0 per cent target band. Headline inflation measures the change in prices of a certain goods and services consumed by households, including food and energy

The commission said real GDP contracted by 1.7 per cent for the fiscal year, a significantly smaller decline than the 4.5 per cent and 3.1 per cent projected in January and February respectively. Real GDP measures how much an economy actually produces are removing the distorting effect of inflation to show whether output genuinely grew or shrank.

The public debt-to-GDP ratio was contained at 65.6 per cent, higher than the 62.5 per cent recorded the previous year but well below the post-hurricane forecast of 68.9 per cent, the IFC said. The public debt-to-GDP ratio is a financial metric comparing a country's total government debt to its annual economic output.

The Specified Public Sector, which comprises the Central Government and public bodies excluding the Bank of Jamaica and the Jamaica Mortgage Bank, recorded a deficit of $34.4 billion. 

The IFC said while that represented a deterioration from the originally budgeted surplus, it was substantially better than the revised projection of a $129.2 billion deficit.

Fiscal Commissioner Courtney Williams said the results reflected genuine resilience but warned that the work of strengthening Jamaica's fiscal architecture was far from done.

"Securing world-class governance requires fixing persistent capacity blocks in capital projects and aligning wage negotiations with the legislative budget cycle," Williams said.

The IFC reserved criticism for the continued failure to execute capital spending. 

It noted that actual capital expenditure across the Specified Public Sector reached $104.7 billion, a $57.6 billion shortfall, representing 35.5 per cent below the original budget of $162.4 billion..

"This is not a fiscal saving, but a chronic under-execution, which hinders economic recovery and structural growth," the IFC stated.

The commission also noted that while the National Reconstruction and Resilience Authority (NaRRA) has been allocated $30 billion in the 2026/27 budget, the effectiveness of any NaRRA-led fiscal expansion would ultimately depend on "the pace, scale, and quality of execution rather than budget allocation."

Looking ahead, the IFC warned of elevated risks from escalating geopolitical tensions, particularly disruptions to shipping through the Strait of Hormuz stemming from the US-Israeli war against Iran, which are already pushing up global energy and transportation costs. 

It also said the potential onset of a Super El Niño event, which could disrupt agricultural output and drive food prices higher, was identified as a further inflation threat.

“The IFC emphasizes that elevated macrofiscal risks, primarily from escalating geopolitical tensions, warrants the Government of Jamaica recasting the budget projections and developing alternative macroeconomic scenarios – baseline, upside and downside – to enhance policy preparedness and fiscal planning,” the watchdog said.

On structural reforms, the IFC pressed the government on two specific issues. 

On the first issue, it has renewed its call for a structured public sector wage negotiation cycle aligned with the budget process as required under the Financial Administration and Audit Act, warning that the current misalignment creates costly uncertainty and forces reactive budgeting through supplementary estimates. 

Second, it urged the government to accelerate the legislative amendments needed to implement the Environmental Levy rate increase to 0.85 per cent, a delay the commission said is costing an estimated $335 million in lost revenue every month.

Finance Minister Fayval Williams announce the levy in April for implementation on May 1. 

However, last month, Tax Administration Jamaica said the measure has been delayed as the Government has yet to complete the legislative process required to bring the measure into force.

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