EPOC Press Statement – Quarterly Media Briefing

Kingston, Jamaica – 26 February 2019

The Economic Programme Oversight Committee (EPOC) met on February 15, 2019 and reviewed the latest available results for the period ending December 2018.

The fifth formal review mission by the IMF under the
current Precautionary Standby Arrangement (PSBA) is scheduled for the period
February 25 – March 8, 2019. This review mission assesses the performance of
the Government of Jamaica (GOJ) in meeting the targets for the end-December
2018 period, and to discuss the performance to date in meeting the structural
benchmarks and commitments under the programme.

Based on the preliminary results for performance to date
through the end of December 2018, the GOJ is on track to meet the targets for
the Quantitative Performance Criteria and indicative targets for the IMF PSBA,
with the exception of the inflation target which triggers a staff consultation
clause whereby the BOJ will consult with IMF Staff on the outlook for inflation
and the proposed policy response.

For the review period April to December 2018, the Fiscal
Performance continued its positive trend.

Revenues Outperform Budget

Revenue & Grants of $448.8b for the first nine months
of the fiscal year (April-December) exceeded the budgeted amount of $437.3b
(+2.6%). Tax Revenues of $388.7b outperformed IMF PSBA target of $360b and GOJ
1st Supplementary budget target of $378.1b.

Tax Revenues year over year increased by $35.6b (10.1%)
from $353.1b for the period April through December 2017 to $388.7b for the
comparable period in 2018.

behind Budget by $11.6b

Expenditure for the first nine months of the fiscal year
(April-December) was $11.6b below budget (-2.6%). Of this amount, Recurrent
Expenditure was $11.0b below budget (-2.8%), while Capital Expenditure was
$0.6b below budget (-1.3%).

Expenditure up 46.6% year over year

Capital Expenditure year over year increased by $14.4b from
$31.0b for April through December 2017, to $45.4b for the comparable period in
2018.This represents a 46.6% increase year over year.


As a result of the Revenue and Grants performance and the
under-expenditure for the first nine months of the fiscal year, the Primary
Balance of $107.7b exceeded the $68.0b IMF PSBA programme target and the GOJ’s
$89.0b 1st Supplementary Budget target for April-December 2018.


Non-Borrowed Reserves as at the end of December 2018 stood
at US$2,522m, significantly exceeding the IMF PBSA Programme Target of US$2.2b,
while Net International Reserves stood at US$3,005m.

dips to 2.4% in December 2018; triggers IMF Staff consultation clause

The 12-month point-to-point inflation rate at December 2018
was 2.4%, below Bank of Jamaica’s target of 4.0% to 6.0% and lower than the
same measure at December 2017 (5.2%).

In line with the Governance Process, Bank of Jamaica (BOJ)
will send a report to the Minister of Finance and the Public Service within 60
days on why the target was missed in December and proposed remedial actions, as
deemed necessary.

Exchange Market

On 25 February 2019, the value of the Jamaican Dollar
vis-à-vis the US dollar was J$131.02= US$1.00, reflecting an appreciation of
1.90% ($2.54) for the Month to Date. This follows depreciation of 6.56% ($8.38)
for January 2019.

The appreciation in the value of the Jamaica Dollar for the
review period was influenced by: (1) the BOJ injecting liquidity of US$80m
through its B-FXITT flash operations as well as (2) low demand for US dollars
as end users anticipate lower rates.

The BOJ continues to use the transparent B-FXITT mechanism
to sell or buy USD when the market reflects a projected shortage or surplus
respectively. FX interventions are intended to address excess volatility and
disorderly market conditions.

estimated growth of 1.7% for October to December 2018

The PIOJ estimated a 4.2% increase in in the Goods
Producing industry and a 0.8% outturn in the Services sector. Mining and
Quarrying was estimated to have grown by 22.9%, Construction estimated at 3.5%
and Agriculture and Fishing estimated at 2.6%.

levels continue to increase

As reported by STATIN, the unemployment rate for October
2018 was 8.7%, a 1.8 percentage point decline compared to the rate of 10.5% for
October 2017. The employed Labour force was 1,219,700 which was 14,400 higher
than in October 2017.

BOJ reports that Private Sector Credit through Deposit
Taking Institutions (DTIs) Increases Year over Year.

Lending to the Private Sector by Deposit Taking
Institutions (DTIs) grew by 14.6% at November 2018; an acceleration relative to
the growth of 12.7% at November 2017. Lending to the productive sector by DTIs
reflected annual growth of 17.7% at November 2018 relative to 8.4% for the
corresponding period of 2017.

continues decline to 2.3% for January 2019

The CPI declined by 0.2% in January 2019. The point to
point inflation was 2.3% which continues to be below the IMF Precautionary
Standby Arrangement (PSBA) inner band of 3.5% and the BOJ’s target of 4-6%.

responds to missed inflation target by lowering policy Interest rates to 1.5%

On February 20, 2019 the Bank of Jamaica announced its
decision to lower its signal interest rate by 25 basis points to 1.50%. This
decision was driven by the continued out-turn of inflation below the BOJ target
of 4-6% and its forecast that inflation over the medium term in the context of
low core inflation “will fall below the target at various points”.

The BOJ’s decision to lower interest rates “is aimed at
increasing the rate of expansion in private sector credit and is not aimed at
influencing the exchange rate.”

reduces Cash Reserve Requirement for Deposit Taking Institutions (DTIs)-March
1, 2019

The Cash Reserve Ratio for DTIs is to be reduced effective
March 1, 2019 from 12% to 9%. This reduction will release $16.8b to the DTIs,
which the BOJ states “will improve their ability to provide more credit to
households and businesses at lower rates and on better terms.”

Bank of Jamaica committed to further reductions in the cash reserve ratio over
the year

EPOC continues to be supportive of the BOJ’s accommodative
stance as it uses its monetary policy tools to stimulate private credit,
through lower interest rates and lower cash reserve ratios which should lead to
increased domestic demand and strengthening of the Jamaican Economy.

Trading Platform to strengthen Market Infrastructure and Price Transparency

The Minister of Finance, Dr. Nigel Clarke, reiterated a GOJ
commitment under the IMF PBSA Programme for the implementation of a FX Trading
Platform by the end of 2019. This FX Platform will be integrated with the
existing payments and settlements systems and regulations will be issued by
September 2019.

EPOC is of the view that this will lead to greater
transparency and price discovery which could result in reduced volatility and
trading margins which would be a major positive for market participants.

upward Trajectory in Tax Revenues, Growth projections below 2% for 2019/20

The selected highlights of Fiscal Policy Paper of Budget
Estimates for FY2019/20 Issued February 14, 2019 are as follows:

Revenues are projected to increase by 7% from $537b in 2018/19 to $576b in
Expenditures will see a marginal increase from a projected $68.8b for 2018/19
to $72.1b in 2019/20The
Primary Balance which is projected to close Fiscal Year 2018/19 at $142.1b is
estimated to close the Fiscal Year 2019/20 at $150.9b

to GDP ratio is projected to fall to 96.4% at the end of the Fiscal Year
2018/19 and is projected to fall to 90.9% at the end of Fiscal Year 2019/20Net
International Reserves (NIR) is projected to close Fiscal Year 2018/19 at
US$2.914b and is estimated to increase to US$3.045b at the end of 2019/20The
inflation for 2019/20 is projected at 4.3%.GDP
growth is projected to be 1.8% for Fiscal Year 2018/19 but is projected to fall
to 1.5% in 2019/20.

Mining and Quarrying is projected to grow by 2% in 2019/20,
which is significantly down from the projected 27% growth for 2018/19 for this

This baseline forecast for GDP growth for 2019/20 is
impacted negatively by the assumption that production is likely to be disrupted
at the Alpart Plant for a total of 3 months due to the installation of various
pieces of equipment.

Despite the missed inflation target and growth level persisting below the 2% growth levels, the economy despite its continued challenges seems poised for growth in the medium term.

EPOC is of the view that the Economic Programme remains on

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September 2020: Update on the GOJ Economic Reform Programme (ERP)

The EPOC met on September 11, 2020 to review the macro fiscal programme of the Government of Jamaica (GOJ) for the fiscal year 2020/21 and over the medium term. EPOC looked in depth at the fiscal and monetary assumptions and actions which underpin Jamaica’s recovery path.
Based on the preliminary performance results, the GOJ is on track to meet the Quantitative Performance Targets for GOJ ERP for end-June 2020, with the exception of the inflation target. However, the implementation of a majority of the Priority Actions for the GOJ ERP has been delayed relative to the timelines established in November 2019, due in large part to the impact of the COVID-19 pandemic.


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The EPOC met on June 2, 2020 and reviewed the performance of the economy for the period ended April 2020.
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The EPOC met on January 24, 2020 and reviewed the performance of the economy for the period ended November 2019.
EPOC reviewed the Quantitative Performance Targets and Priority Actions Matrix FY2019/20 – FY 2020/21 which formed the basis for the monitoring of the GOJ Economic Reform Programme (ERP) following the expiry of the IMF Stand-By Arrangement on November 10, 2019.
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GOJ Economic Reform Programme is on Track

Kingston, Jamaica – February 5, 2020: Based on the preliminary performance results to date through end-November 2019, the GOJ is on track to meet the Quantitative Performance Targets for the GOJ ERP for end-December 2019, with the exception of the inflation target.
Selected Quantitative Performance Targets and Policy Actions Status Updates

Economic Growth
The World Economic Outlook (WEO) is projecting global growth to rise from an estimated 2.9% in 2019 to 3.3% in 2020 while growth in the Latin American and Caribbean region is expected to rebound to 1.6% in 2020. The Planning Institute of Jamaica projects Jamaica’s real GDP growth for the fiscal year 2019/20 to fall within the range of 0.0%–1.0%. 
EPOC concurs with the view of the PIOJ that growth will be low for the remainder of the fiscal year 2019/20. However, EPOC expects that going forward through 2020-2022, as the impact of the fallout from mining is behind us, growth should begin to get back to the 2% growth levels.
Monetary Performance
While point-to-point inflation of 6.2% as at December 2019 was outside of the BOJ target range, it is expected to be temporary and the BOJ will maintain its accommodative monetary stance. The most recent survey of business expectations by BOJ expects inflation for the next 12 months ending November 2020 to be 5.0 percent owing largely to inflationary trends and exchange rate.
Credit Growth
This accommodative stance continues to spur Credit growth from the Deposit taking Institutions as credit to businesses and households increased by 15.5% between September 2018 to September 2019.
International Reserves
As at December 31, Jamaica’s net international reserves are healthy at US$3.16B, non-borrowed reserves at US$2.821B exceed the target of US$2.343B. Gross international reserves continue to exceed programme targets and exceed the international adequacy benchmark.
Fiscal Performance
The fiscal performance continues to be strong as tax revenues as December 31 came in at J$414.7B continue to outperform budget and the first supplementary budget targets of J$407.1B which led to a second supplementary budget being tabled in parliament for Fiscal year 2019/20.
Foreign Exchange Market
There continues to be market apprehension and a heightened uncertainty around the volatility of the exchange rate, the BOJ continues to consult with the market in an effort to reduce volatility and smooth out demand and supply imbalances. The BOJ recently introduced a FX Swap Arrangement and is encouraging authorized dealers and cambios to further deepen the market through the introduction of forward contracts while looking to implement the electronic trading platform in early 2020 which will provide greater transparency and price discovery for market players. 
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