Jamaica: First Review Under the Extended Arrangement Under the Extended Fund Facility and Request for Modification of Performance Criteria

Extended arrangement. On May 1, 2013, the IMF Executive Board approved a request by the Jamaican authorities for a four-year Extended Arrangement in an amount of SDR 615.38 million (225 percent of quota) with a first purchase equal to 50 percent of quota. Economic developments. Growth has remained anemic in the aftermath of hurricane Sandy and the subsequent drought, while inflation has picked up, in part due to the passthrough of further depreciation of the exchange rate. International reserves increased consistent with program requirements, but remain low. The debt exchange has not undermined market stability, but public debt, as envisaged, remains at a very high level, at 146 percent of GDP. Main elements of the program review: All end-June quantitative conditions and all structural benchmarks were met. The 2013/14 budget is in line with the program. Economic developments remain in line with program assumptions and the macroeconomic outlook and financing scenario remain broadly unchanged from the program approval. The authorities have committed to press ahead with the next round of reforms, including the establishment of a fiscal rule, and comprehensive tax reform. Risks to the program remain high, including possible external shocks, a delayed growth recovery, shortfalls in budget financing, and policy slippage. Appraisal. Based on the performance to date and the authorities' updated policy intentions, staff recommends completion of the first review under the EFF.