IMF gives Jamaica thumbs up

Percival Patterson is serving his fourth term as Prime Minister

Jamaica has succeeded in stabilising its economy and its economic prospects are positive, the International Monetary Fund says.

In its annual review of the island's economy, the IMF praised the government for tackling its huge debt burden and improving investor confidence.

Future economic growth of up to 4% a year was possible, it said, given a recovery in tourism and mining sectors.

However, the IMF warned that major economic reform was still essential.

Recovery

The IMF said that Jamaica, under its four-term prime minister Percival Patterson, had recovered from a financial crisis in the first half of 2003.

At that time, the government was forced to use currency reserves to pay off debt, triggering a sharp fall in the value of the Jamaican dollar.

Over the past year, Jamaica has reduced its public debt, increased revenues from taxation and boosted its annual growth rate from 1% to 2%.

The basis for a period of sustained growth and renewed confidence has been laid Ian Bennett, International Monetary Fund

At the same time, inflation has been brought under control and interest rates have halved since March 2003.

"Following a fairly challenging period recently, there is clear evidence that the economy has stabilized," said Ian Bennett, the IMF's executive director for Jamaica.

"The basis for a period of sustained growth and renewed confidence has been laid."

Debt reduction

The Jamaican government is forecasting 2.5% economic growth in 2004-5, rising to 3%-4% in the medium term, a scenario which the IMF described as "plausible".

The economy has been boosted by a resurgence in the country's crucial tourism industry. Visitor numbers returned to pre-September 11 levels last year.

Aluminium exports have surged due to increased international demand while the agriculture sector has recovered from the effects of severe flooding in 2003.

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The government has said it intends to balance the country's budget by the end of the 2005-6 financial year.

It has also laid out plans to reduce the country's debt as a percentage of GDP from its current level of 145% to 100% by 2009.

Despite progress over the past year, the IMF said Jamaica's huge debt made it vulnerable to external economic pressures such as rising oil prices and the impact of possible climactic disasters.

The financial body said the Jamaican government needed to introduce additional fiscal reforms and address weaknesses in the country's financial industry.

It also had to do more to attract private and foreign investment by deregulating its labour market and tackling the country's high crime rate which the IMF said was "detrimental to the business climate".