Missed Inflation Targets Trigger Talks with IMF

The Economic Programme Oversight Committee (EPOC) says talks have been triggered with the International Monetary Fund (IMF) after the Bank of Jamaica (BOJ) failed to meet inflation targets.

In a statement issued today, EPOC praised the fiscal performance of the country in a number of fields.

EPOC also says it welcomes the governments move toward an independent Central Bank. But it cautions the BOJ that it should better manage the exchange rate which has led to record highs in the local currency versus the US dollars.

EPOC says it has noted that the first quarter targets for inflation in the IMF’s Stand-by Agreement has been breached by the BOJ.

EPOC says this will trigger the consultation with the IMF which requires the BOJ to explain the reasons for the breach and propose a response.

EPOC says at the end of June inflation stood at 2.8 percent. This is below BoJ’s target of 4 to 6-percent inflation.

The BoJ had indicated that inflation fell outside the target due to stronger than anticipated recovery in agriculture in the quarter ending in March.

It says there was also a lower than forecasted imported inflation. EPOC says, although a low inflation out-turn can be viewed positively, it has implications for programme targets like tax revenues, debt to GDP targets, and the 9-percent wage to GDP rule for this fiscal year.

But, EPOC says it’s positive that non-Borrowed Reserves, which stand at over USD$2.4-billion, has exceeded the stand-by agreement target of $2.73-billion at the end of June.

Meanwhile, EPOC says the government is continuing it’s trend of solid fiscal performance.

It says over the review period ending in May, tax revenues stood at $78.7-billion. That’s ahead of the budget target of $77.7-billion.

EPOC says this is as a result of strong compliance. It says Jamaica now has a primary surplus of $15.8-billion; exceeding the $14-billion target.

EPOC says it’s likely that the fiscal targets in the IMF’s stand-by agreement will be met for the next review period.

In addition, EPOC says it welcomes the government’s move toward an Independent Central Bank and inflation targeting to manage the economy.

EPOC Co-chair, Keith Duncan, says the movement towards an Independent Central Bank and inflation targeting is an important foundation for fiscal and economic stability.

But he cautions that the transition should be carefully managed.

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