IMF Agrees To Lower Jamaica’s Primary Surplus Target To 7.25% (This Year) And 7% In 2016/2017

The International Monetary Fund has just completed its tenth review of Jamaica’s performance on its programme and has agreed to loosen the country’s primary surplus target.

The primary surplus can be defined as what is left to service debt after the government considers its revenues and expenditure on running the country. So wages, social programmes spending, and general spending on maintaining the country is taken out of revenues, and what is left is called the primary surplus.

Jamaica’s current primary surplus target is 7.5%.

The reduced target will give the government more space to increase public spending on capital outlays that boost growth and job creation as well as to continue to protect social spending.

The IMF mission says,

“With macroeconomic stability now well entrenched, and the debt dynamics improving, the authorities and mission agreed that a loosening of fiscal policy and a realignment of monetary policies were both warranted to better support the real economy.

To this end, a staff level agreement was reached to lower the target for the primary surplus to 7.25 percent of GDP for this fiscal year and to 7 percent of GDP for FY2016/17.

This additional fiscal space will provide an opportunity to increase public spending on capital outlays that boost growth and job creation as well as to continue to protect social spending. Further, a more expansionary monetary stance will help complement this fiscal expansion by supporting credit expansion and private-sector activity. Continued strong program implementation will remain important to achieve fiscal and debt sustainability.