Jamaica: Seventh Review Under the Extended Fund Facility and Request for Modification of Performance Criteria-Staff Report; Press Release; and Statement by the Executive Director for Jamaica

EXECUTIVE SUMMARY Recent data point to a gradual pick-up in economic activity as the effects of the drought fades. Growth should reach 2 percent in 2015/16, and inflation is projected to fall to an average of 5¼ percent, largely owing to lower fuel prices. The program is on track. All December 2014 quantitative performance criteria were met and structural reforms have progressed broadly on schedule. Based on the continued strong performance and the authorities' policy commitments, staff recommends completion of the seventh review. Topics of the review. Discussions centered on the 2015/16 budget (which maintains the ambitious primary surplus target, at 7½ percent of GDP), reforms of the financial sector, and steps to boost long-term growth. Efforts are being made to improve public financial management and tax compliance. A new public-sector wage agreement is under negotiation. The securities dealers will transition to a trust-based framework by August. The resilience of the financial system is being reinforced. Progress in energy sector reform is expected to support investment and growth. Risks to the program are slowly waning but remain high. Notwithstanding the authorities' demonstrated resolve in implementing the program, more tangible signs of improvements in growth will be important to sustain the social consensus needed to continue on the reform trajectory. Jamaica still faces risks from disruptions in external financing (including from PetroCaribe). Revenue shortfalls or an inability to contain the government wage bill could undermine the fiscal position. Vulnerabilities in the financial system, particularly during the transition to the trust for securities dealers, could become more prominent.