Jamaica Achieving Macro-Stability and Removing Constraints ...documents.worldbank.org/curated/en/384231468771721658/pdf/multi0page.pdf · Report No. 1 5542-JM Jamaica Achieving Macro-Stability

Report No. 1 5542-JM

JamaicaAchieving Macro-Stabilityand Removing Constraints on GrowthCountry Economic Memorandum

May 21, 1996

Countrv Department III

Cou ntrv Operations )ivision 11

Latin Amnerica anci the Carihbean Region

Document of the World Bank

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FISCAL YEAR

April I - March 31

CURRENCY EOUIVALENTS

Jamaica adopted a market determined exchange rate in September 1991.At the end of March 1996, US$1.00 = J$40.00.

TABLES

Totals in tables do not always equal the sum of their components due to rounding.

CONTENTS

ABBREVIATIONS AND ACRONYMS .................................................................. vJAMAICA AT A GLANCE ..................................................... viiPREFACE ................................................... ixEXECUTIVE SUMMARY ................................................... xi

1. IMPROVING MACROECONOMIC MANAGEMENT ................................................... 1I. Historical Perspective .................................................... 1H. Recent Economic Dificulties .................................................... 2I. Recurring Stabilization Cycle .................................................... 3IV. Achieving-Macro Stability .................................................... 5

2. REMOVING LONG-TERM CONSTRAINTS ON GROWTH ......................................... 8I. Growth Trends .................................................... 8H. Structural Rigidities Impeding Growth ................................................... 12H. Medium Term Growth Prospects ................................................... 19

3. UPDATE ON POVERTY REDUCTION ................................................... 20I. Characteristics of the Poor ................................................... 21II. Recent Trends ................................................... 21Im. Government Strategy for Poverty Reduction ...................................... 22IV. Assessment of Programs in the Social Sectors ................................................... 23

4. CONCLUSIONS ............................ 2.5.......................................... 25

TECHNICAL ANNEXES

ANNEX I: FINANCIAL SECTOR ISSUES ................................................................. 29ANNEX II: GROWTH ANALYSIS ................................................................. 33ANNEX H: LABOR MARKET ISSUES ................................................................. 43ANNEX IV: DOMESTIC AND EXTERNAL DEBT: ISSUES AND OPTIONS ............. 49

STATISTICAL APPENDIX

Hii

Table No.

Al. I Population Trends, 1978-94Al.2 Main Labor Force Indicators, 1978-94Al.3 Labor Force and Employment, by Industry Group, 1978-94A2. 1 Expenditure on Gross Domestic Product at Current Prices, 1980-94A2.2 Fixed Capital Formation at Current Prices, 1980-94A2.3 Gross Domestic Product By Sector of Origin at Current Prices, 1986-94A2.4 Gross Domestic Product By Sector of Origin at Constant Prices, 1986-94A3. I Balance of Payments, 1980-94A3.2 Trade in Services, 1980-94A3.3 Exports, F.O.B., 1980-94A3.4 Exports, Value, Volume and Price, 1980-1994A3.5 Imports by End-Use, 1980-94A3.6 Direction of Trade, 1980-94A3.7 CARICOM Exports and Imports, 1985-94A3.8 Net International Reserves, 1982-95A3.9 Exchange Rates, 1974-95A4. I External Debt, 1980-94A4.2 Summary of External Debt, 1980-94A5. I Summary Operations of the Consolidated General Government, 1981/82 - 93/94A5.2 Central Government Operations, 1981/82 - 95/96A5.3 Central Government Revenue, 1981/82 - 95/96A5.4 Central Government Expenditure, 1981/82 - 95/96A5.5 Bank of Jamaica Losses, 1984/85 - 95/96A6. I Money Supply, 1987-95A6.2 Summary Accounts of the Bank of Jamaica, 1989-94A6.3 Summary Accounts of Commercial Banks, 1983-94A6.4 Distribution of Commercial Banks Loans and Advances, 1979-94A6.5 Selected Interest Rates, 1985-95A7 I Production of Selected Agriculture Crops, 1980-94A7.2 Value Added in Agriculture, Forestry and Fishing, 1986-94A7.3 Tourism Statistics, 1980-95A8. 1 Consumer Price Index, 1984-95A8.2 Consumer Price Index (Percentage Change), 1984-95

Map (No. 20846)

iv

ABBREVIATIONS AND ACRONYMS

ACB Agricultural Credit BankACP African, Caribbean and Pacific countriesBO] Bank of JamaicaCARICOM Caribbean CommunityCBI Caribbean Basin InitiativeCBO Community Based OrganizationCEM Country Economic MemorandumCET Common External TariffCNB Century National BankCXC Caribbean Examination CertificateEU European UnionEFF Extended Financing FacilityFGT Foster Greer Thombecke MeasuresGATT General Agreement on Trade and TariffsGCT General Consumption TaxGDP Gross Domestic ProductGNP Gross National ProductHEART Human Employment and Resource Training TrustHRDP Human Resource Development ProgramIBRD International Bank for Reconstruction and DevelopmentICOR Incremental Capital-Output RatioIDB Inter-American Development BankIMF International Monetary FundJAMPRO Jamaica Investment Promotion CorporationJMB Jamaica Mortgage BankKMA Kingston Metropolitan AreaLAR Liquid Asset RatioLFS Labor Force SurveyMIDA Micro Investment Development AgencyMOF Ministry of FinanceNAFTA North American Free Trade AgreementNCB National Commercial BankNDB National Development BankNGO Non Governmental OrganizationNHT National Housing TrustNIBJ National Investment Bank of JamaicaPETROJAM Petroleum Corporation of JamaicaPIOJ Planning Institute of JamaicaPSDAL Private Sector Development Adjustment LoanRADA Rural Agricultural Development AuthorityROSE Reform of Secondary EducationSACTF Special Anti-Crime Task ForceSAL Structural Adjustment LoanSECAL Sector Adjustment LoanSESP Social and Economic Support ProgramSLC Survey of Living ConditionsSTATIN Statistical Institute of JamaicaTFP Total Factor ProductivityUSAID United States Agency for International Development

v

Jamaica at a glanceLatin Lower-

POVER1TY and SOCIAL America middle-Jamaica & Cart. Income Development dlamond

Population mid-1994 (riWUfons) 2.5 471 1,097 Life expectancyGNP per capita 1994 (USS) 1,420 3,310 1,680

Average annual growth, 1990-94

Poplation (%J 0.9 1.8 1.4Labor fto (%) a's 2.4 1 A GNP Gross

Most recent stimaterv yearweveb0J s/nc 1969) per primarycapita enrollment

Povy: headcount Index (% of poptellon) 28 -,

Urban population (S of ttl populatfon) 55 71 54Lite expedancy at birth (yser) 74 68 67Infant morlality (per I.OOQ bifJs) 14 42 35Child matnutrhior (% tchflcen urosr 5) 10Aooess to safe water ( of populaton) 72 80 78 Access to safe waterlliteracy (S of popultion age 15+) 24 15Gross primary enrollment (X of 9hxl-*ge plvlal'n) 107 110 104 -Jamaica

Wrnhe 107 101 Lower-middle-income groupFemaeA 107 .. 101

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

197S 1986 1994 1995 Economic ratlos

Gross dometic InvestmenGDP 25.8 25.3 22.0 25 0 Openness of economyExports of goods and non-factor servkxalGDP 35.3 58.2 60.1 58.0Gross domestic svings/GDP 15.4 14.4 18.7 13.8Gross national savings/GDP 17.0 7.3 21.8 23.7

Currnt account belanceirP -10.1 -18,0 -0.2 -4A4Wterest paymentslGOP 3.8 10.4 4,3 Savings InvestmentTotal debt/GDP 56.4 203.3 101.8Tot debt servicelexports 28.6 40.4 22.2Present alue of debtUGDP ., . 91,9Present value of debt/exports .. .. 145.6

Indebtedness1975-14 119664 19S4 1996 1996-04

(ave"ae annual growth)JaicGOP -0.8 4.1 1.1 0.5 3.5 -JamaicaGNP per capita -3.2 3.9 -0.9 .. 2.5 Lower-middle-income groupExpofts of goods and nts 0.6 3.2 .. .. ..

STRUCTURE of the ECONOMY1975 1985 1994 1995 Growth rnes of output and Investment I%)

(% i oGDP) zAgriculture 7.4 6.0 8.5 8.7 30 -Industry 36.8 37.3 37.1 37.8 0.\

Manufacturing 17.1 20.0 17.3 17.6 10/Services 55.9 56.7 54.4 53.5 0

A0 02 02 0 9

Private consumption 66.2 70.1 69.1 76.3 -20General government consumption 18.3 15.5 12.2 10.1 -GD1 -GDPImports of goods and non-factor services 45.6 69.1 63.4 69.4

(average annual growth) 1976-84 198496 1994 1996 Growth rates of exports and Import I)%

Agrculture -0.3 3.1 7.5 2.0 -0Industry -3.4 4.3 -0.2 1.0 20

Manufacturing -3.1 1.8 -0.5 1.0 10Services 1.5 4.6 1.1 -2.5 10

Private consumption 1.0 7.4 -10 o 92 94 ff

General government consumption 0.8 6.2 . .. -20

Gross domestic investment -5.2 3.3 .. .. -Imports of goods and non-factor services -1.7 5.9Gross national product -1.9 4.8 0.1 .. -Expor

t-Import

Note: 1995 data are preliminary estimates. Figures in italics are for years other than those specified.The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will

be incomplete.

vii

Jamaica

PRICES and GOVERNMENT FINANCE

Domes:tic prices 1975 1985 1994 1996 Inflation (%l

(X change) soConsumer prices 17.4 25.7 26.8 25.5 60Implicit GDP deflator 20.5 25.7 32.3 * 0

Government flnance 20(% of GDP)Current revenue 33.2 35.9 oCurrent budget balance 7.6 6.3 60 91 92 93 94 95

Overall surplus/deficit 3.8 0.9 -GDP ddef -- CPI

TRADE

(millions USS) 1985 199 195 Export and Import levels (mill. US$)Total exports (fob) 569 1,220 1,400 3ooo

Aluminum 212 537 600 2500Oiher metals 78 74 66MAanufactures . .. 306 26000

Total imports (ci. 1,144 2,167 2,734 1500Food .. 82 126DO

Export price index (1987-100) 1o 60 91 92 93 94 99Import price index (1987-100) 101Terms of trade (1987=100) 0 Exports m Imports

BALANCE of PAYMENTS

(millions USS) 1976 1985 1994 1996 Cufrent account balance to GDP ratio I%)Exports of goods and non-factor services 1,051 1,175 2.548 2,811 0-.-.-Imports of goods and non-factor services 1,285 1,395 2.687 3,384 -2 - go r,i 92 03 rl ff

Resource balance -234 -221 -139 -573

Net factor income -76 -296 -318 -177 4Net current transfers 23 153 447 532

Current account balance,before official transfers -288 -364 -10 -218 e _

Financing items (net) 213 291 348 295 -10Changes in net reserves 74 73 -338 -77 -12

memo:Reserves including gold (mill. USS) 126 161 735 982Conversion rate (loalaUSS) 0.9 5.6 33.1 39.2

EXTERNAL DEBT and RESOURCE FLOWS

1976 1986 1993 1994(millions USS) Composition oftotal debt 1994 (mill US$Total debt outstanding and disbursed 1.614 4,103 4.112 4.318 CopItnofotldt.19 Il.U8

IBRD 44 468 607 595IDA 0 0 0 0

Total debt service 335 511 542 595 G AIBRD 5 52 123 124 F 483 595IDA 0 0 0 0 424 c

Composition of net resource flovs 318Official grants 1 55 242 91 D\N 5

Official creditors 41 251 -39 -139 87Private creditors 152 41 -1 6 EForeign direct investment -2 -9 78 117 1911Portfolio equity 0 0 0 0

Worid Bank programCommitments 15 9 107 48 A - IBRO E - BilateralDisbursements 8 75 77 22 B- IDA D - Other muItilateral F - Prht I

Principal repayments 2 18 73 76 C- MF G - Short-termNet flows 6 57 4 -54Interest payments 3 34 49 49Net transfers 3 23 -45 -102

Intemational Economics Department 5/23/96

viii

PREFACE

As part of the Bank's assistance strategy for Jamaica, this report provides amacroeconomic framework to support the Govemment's efforts to achieve macro stability,promote higher growth, and reduce poverty. The report analyzes the factors underlying the recenteconomic destabilization and lays out a macro policy mix that could reduce inflation and externalimbalance and facilitate macro stability, which is a pre-condition for economic growth. To makethe business climate conducive for higher growth, the report also suggests policy changes inseveral areas -- the financial sector reform, improving the quality of labor and the functioning ofthe labor market, public sector modernization, and private sector development. The reportacknowledges the contribution of the Government's social programs in poverty reduction whilesuggesting that higher growth with lower inflation is a crucial element in making a significant dentin the reduction of poverty.

The economic reform agenda for Jamaica is large. This report is not intended to addressall the problems facing Jamaica. Rather the report should be seen as complementing othereconomic and sector reports, and to specific project documents that detail the operational issuesand action plans to address a wide array of problems.

The report was prepared by Raj Nallari, Country Economist and Country Officer(LA3C2), under the general guidance of Norman Hicks, Lead Economist (LA3DR), with inputsfrom Eliza Winters (LA3C2) and Geeta Sethi (IECIT). Errol Graham (Economist, ResidentMission) was responsible for the macroeconomic projections. Zhicheng Li and Susan Wilder,Consultants, updated the statistical annexes. The report benefitted from inputs from the JamaicaCountry Team members and from 1995 policy notes on External Debt, prepared by MichelVaugeois (IECIF), and on Labor Market, prepared by Martin Rama (PRDPH). Hazel Vargascoordinated the processing of this report. Paul Isenman is the Director of Country Department IIIand Philippe Nouvel is the Division Chief of the Country Operations Division II. The report wasdiscussed with the Government of Jamaica during May 1996.

ix

EXECUTIVE SUMMARY

Jamaica: Achieving Macro-Stability and RemovingConstraints on Growth

i.. The previous Country Economic Memorandum of April 1994 titled 'lamaica: A Strategyfor Growth and Poverty Reduction" was written at a time when the country was in the midst of animproving macroeconomic situation. This improvement continued until mid-1995 when financialsector difficulties and an upsurge of inflation threatened macro stability. Events in recent monthshave demonstrated that while Jamaica has made much progress towards macro stability andreforming the economy during the 1990s, there are still structural rigidities that affect itseconomic management and ability to generate substantial growth.

ii. This report focuses on the two highest priorities of achieving macro stability and lifting theimpediments to growth. Chapter 1 details the recent economic difficulties and discusses a mix ofmonetary and fiscal policies that could lower inflation. Chapter 2 provides a synopsis of growthtrends and details the deeper structural issues impeding growth. These include modernizing thefinancial sector, improving the quality of the labor force and labor market functioning, providingcritically needed infrastructure while improving the regulatory frameworks, improving theperformance of the public sector, and unburdening the small business sector. Medium termgrowth prospects are projected. Chapter 3 updates the poverty situation and shows thatGovernment's social programs have provided some support to the poor during 1991-94, but thishas been offset by high inflation and low growth during that period. In the future, higher growthwill be necessary for making a significant reduction in poverty.

Recent Economic Difficulties

iii. The economic performance under the reform programs supported by the internationalfinancial institutions and implemented by the current administration has been very mixed. Since1991, growth has averaged less than 1% per year, and inflation has averaged about 40% per year.However, progress has been made in reforming some key areas. The foreign exchange regime hasbeen liberalized. Substantial trade liberalization, deregulation and privatization has taken place. Theexternal current account moved from a deficit of 5% of GDP by end-March 1992 to near balance byend-1994. Private transfers and capital inflows (now amounting to over 10% of GDP) have more thantripled during the last three years, and gross intemational reserves had reached about five months ofimports by early 1995. While external debt remains high at over 80%/0 of GDP, timely repayment ofJamaica's extemal obligations and debt reschedulings have reduced debt service to more manageablelevels.

iv. Despite public sector surpluses since 1993, the intra-quarter deficits in Govemment accountsand occasional fiscal surges, including public sector wage increases, have contributed to an expansivemonetary policy which fueled inflation. During the past five years, the key determinant of money supplyhas been the rapid increase in domestic credit, mostly to the private sector. But, the objective ofmonetary policy has been frequently shifting from reducing inflation in 1991-92 to accumulatinginternational reserves in 1993-94 to lowering interest rates in 1995 and, more recently, to maintaining

xi

JAMAIC4: COUNTRY ECONOMIC MEMORAND UM

financial sector stability. In addition, the two-year wage bargaining system between Jamaicanemployees and employers has led to large and inflationary wage payments once every two years.

v. Underlying the resurgence of high inflation since July 1995 was the continued growth inmoney supply of about 35% per year and the wage increases of over 50% (including back pay fortwo years) granted by the Government to its employees during the latter half of 1995. Privatesector wages increased correspondingly. Imports, mostly consumer goods, increased by 27% in1995 as a result of demand pressures. The failure of a small group of financial institutions inDecember 1994, the public announcement of the problems of the Century National Bank (CNB) in July1995, and more recently, the failure of other smaller financial firms are compounding the difficulties ofeconomic management for the Government of Jamaica. In addition, the Central Government had alsotaken over the large debts of the loss-making public water company in 1995.

vi. Partly as a result of these developments, there was a slide in the J$ vis-a-vis the US$ in1995. To stabilize the J$ and with inflation of 3% per month, the BOJ injected US$93 million intothe system during the last quarter of 1995 by drawing down its international reserves. Nominallending rates now range from 55% to 60% and the T-bill rate is about 40%. Without adequatecorrective measures, the public sector surplus of about 3% of GDP at end-March 1996 could beeroded by the additional wage increases to Government employees, the costs of the failed andtroubled financial firms, the increase in interest payments on domestic debt, and losses in some ofthe public entities. In parallel, the external current account deficit is estimated to havesignificantly widened from near-balance by end-1994 to over 4% of GDP by end-1995, and isnow estimated to have further widened to 6% of GDP by end-March 1996.

vii. In an attempt to control inflation, the Government attempted to reduce the liquidity in thesystem by introducing a special deposit scheme in August 1995 that required selected commercialbanks and financial firms to maintain up to 20% of their liabilities with the BOJ over and above theordinary reserve requirements, which were already very high at 47%. The result was a continuation ofhigh real interest rates, low private investment levels and low growth.

viii. The Government has been taking other actions since August 1995 to correct the problems.These include cuts in public expenditures on goods and services, phasing payment of wageincreases to the Government employees, monitoring the dealings of the cambios, ceasing advancesto commercial banks at below market interest rates, facilitating the merger of the NationalCommercial Bank (NCB) with the Mutual Security Bank, and identifying several weak buildingsocieties for closure. In order to improve the monetary policy and to be more effective inregulating and supervising the financial sectors, the Government in early 1996 proposed greaterautonomy to the BOJ. This proposal is now being discussed in the Parliament. The Governmenthas also recently initiated moves towards a Social Partnership that could lead to a much neededconsensus on economic policy among the Government, the labor unions and the private sectoremployers.

Lifting Longer Term Constraints on Growth

ix. Real GDP growth during 1991-95 has been quite low at less than 1% per year. One of themain reason for this low growth is the high inflation of about 40% per year, which together with

xii

Executive Summary

doubts about the economic reforms, increased economic uncertainty and diverted privateresources towards short-term financial instruments with higher returns. The high inflation has alsoled to substantial appreciation of the real exchange rate during 1993-95 (as the nominal exchangewas stable). During the 1990s, the adverse impact of a decline in terms of trade was relativelysmall at 0.6% of GDP per year.

x. High real lending rates (ranging from 22-37% during the last 3 years) and a high incidenceof labor unrest have dampened investment. The efficiency of investment in Jamaica is very lowbecause of the structural impediments mentioned below. In addition, a significant increase ininvestment in the housing stock will not have the multiplier effect on growth. Also, Jamaica's highcrime rate is adding security related costs on investments. Concerned with low growth, theGovernment has recently finalized a document on Industrial Policy which reiterates the Government'sintention to continue interest rate subsidies to the agricultural sector and to expand equity participationin some of the productive sectors. Further, in order to provide interest rate relief to manufacturing andtourism related firms hurting from the high interest rates, the Government through an 'tnterpriserestructuring program" has in recent months begun providing funds to bail out companies on the brinkof closure. One stipulation for such assistance to a company is that the commercial bank to which thedebt is owed must be prepared to write off a corresponding amount. The Government should resistpressures to return to the macroeconomic populism of the past.

xi. The Government support to the troubled financial institutions is postponing an effectivesolution towards reforming the financial sector and is exacerbating the loss of confidence in thesystem. The BOJ should focus its efforts on restructuring troubled banks, place the failedinstitutions under 'zonservatorship," facilitate their merger with relatively sound commercialbanks or accelerate their liquidation, identify roll-over of large loans for monitoring, and ensurecapitalization of 8% of assets. At the same time, there is a need to update 'prudential norms" inthe financial sector and standardize the asset/loan quality. In the medium to longer term, thesupervisory system needs to be strengthened, both in its structure and in its capacities, includingincreasing the staffing adequacy (both in quality and number of staff) of the supervisory agencies,upgrading the information systems used as input for off-site analysis and improving the auditingand supervising standards for financial institutions. The Govemment is keen to introduce a depositinsurance scheme on April 1, 1997, but is aware that several actions have to be taken to improvethe regulatory framework and the supervision capacity before the scheme is put in place.

xii. A flexible labor market is essential for Jamaica to generate rapid growth. In March 1995,the Government appointed a high-level Labor Committee, which in April 1996 maderecommendations to the Govemment in its Interim Report. The key recommendations pertain toimproving the labor market functioning and employer-employee relations. However, the mainissue that needs to be addressed is to change the current system of two-year wage setting that isoften prolonged over years. A 'binding arbitration" system based on the principles of quickresolution by an impartial panel, whose decision will be final, may be a preferable alternative. Inaddition, the quality of the labor force could be improved by further changes in curriculumdevelopment, improving access and quality of education and training, and by facilitating theadoption of new technologies in the production processes. There is a critical need for trainedmanagers and a public-private partnership would be required to address this issue.

xi"i

JAMAICA: COUNTRY ECONOMIC MEMORANDUM

xiii. The public sector's size is still large despite retrenchment and divestment of public entitiesin recent years. The public sector accounts for over 35% of GDP and over 110,000 jobs (11% oftotal employment). However, among other things, the administrative capacity is weak and this isadversely impacting upon the Government's ability to maintain and provide basic economic andsocial infrastructure, in particular to the poorer areas, and to maintain law and order.

xv. The infrastructure investment demands are large and the public sector has neither theresources nor the capacity to undertake these investments. For example, additional investmentrequirements over the next fifteen years in the power and water sectors are estimated at US$600million and US$1000 million respectively. To entice private investors, a clear regulatoryframework would be essential. Although Jamaica has industry-specific laws for mostinfrastructure areas, they are often dated and require review and possible amendments. Progressin this regard is most advanced in the electricity sector, where a general legal framework iscompatible with private participation. In the water sector, however, the existing legislationprovides for a monopoly to the National Water Commission and there is no licensing system inplace to support private participation in this sector. Significant work needs to be done to improvethe frameworks for airports, ports and railways. In addition, small businesses need to beencouraged by a reduction in the overhead costs through simplified Government procedures.

Government Strategy for Poverty Reduction

xvi. The Survey of Living Conditions (SLC) for 1993 estimates that 28.4% of the populationlives below the poverty line. About 60% of the poor live in rural areas, 21% in KingstonMetropolitan Area, and the remaining 19% live in other towns. Most of the poor are children andyouth. About 80% of the poor are employed and the majority of them are farmers and domesticservants. But urban poverty and unemployment contribute to the country's crime problem. Muchof the violence in the garrison communities of Kingston can be traced to the drug trade. TheGovernment has initiated several measures to curb crime and violence but needs to further step-upits efforts.

xvii. The increase in the number of people below the poverty line mainly occurred with the highinflation of 1991. At present, public resources to support the poor are spread too thin across alarge set of social programs leading to some confusion among the poor about their eligibility andaccess. Coordination among various agencies dealing with the several social programs needs to beimproved as some inefficiency in providing services to the poor are noticeable. Adequate policyand programs for rural development are lacking and education and health sector programs also do notadequately address the needs of the rural poor. Collaboration among residents, the private sector,voluntary services agencies, community based organizations (CBOs) and the Government couldbe further improved. In addition, the Government should be cognizant of private safety nets inthe form of remittances from abroad in design and delivery of social services.

Conclusions

xviii. Economic developments since July 1995 indicate that the macro stabilization is not yetcomplete, and that policy slippages and structural rigidities are thwarting.the Government effortsto achieve macro stability. The Government is aware that macro stability is a pre-condition for

xiv

Executive Summary

private sector led growth. After the recent formal exit of the IMF, the Government is continuingits close discussion with the IMF in designing and implementing a consistent set ofmacroeconomic policies. The Government's main objective is to enhance rapid growth as this isan essential element in poverty reduction. There are several factors limiting growth, but the keypriorities for Government are to:

* Improve economic management through consistent and stable fiscal and monetary policies soas to reduce inflation and reduce economic uncertainty. During the past five years, the moneysupply growth was high and fiscal surges, in particular the large wage increases toGovernment employees once every two years, contributed to the resurgence of high inflation.The Government needs to bring down inflation by lowering money expansion, especially byceasing BOJ advances to troubled financial firms. The Government is committed tomaintaining a stable but competitive exchange rate and slowing down the accumulation ofinternational reserves by the BOJ. As inflation is reduced, the BOJ should phase out thespecial deposit scheme and gradually lower reserve requirements on the commercial bankswhile raising the reserve requirements on the financial firms and building societies so as tobring down interest rates. Continued restraint on public spending, especially on wages andsalaries, is required. Greater autonomy to the BOJ could improve the conduct of monetarypolicy and facilitate the financial sector reforms.

* Address the financial sector problems. High real interest rates are one of the factors that areshifting private resources from productive sector investment towards short-term financialinstruments with higher returns. The Government needs to facilitate the early restructuring ofthe weak financial institutions while ensuring that prudential norms in this sector are updated.Further, there is a need to strengthen the supervisory system.

* Rebalance the roles of private and public sectors through an increase in private provision ofpublic services, and as planned by the Government, speeding-up privatization of the railways,Petrojam, power and water companies. At the same time, improvements in the regulatoryframeworks in these critical sectors will be necessary for bringing in private investment. Asalso planned, modernization of the public administration at the Central Government level,while simultaneously strengthening the local governments and the community basedorganizations could support efficient delivery of public services.

* Reduce the incidence of poverty, which in itself is a result of high inflation and low growth.The wide net of social programs are holding the incidence of poverty to 1990 levels. But, inthe future, sustained high growth will be required to make a significant dent on poverty andperhaps, on crime and violence.

xv

Achieving Macro-Stability and Removing Constraints on Growth

1. Improving Macroeconomic Management

1. Jamaica is once again facing serious economic and social difficulties. There has been anupsurge in inflation since July 1995 as policy slippage and financial sector difficulties combinedwith other structural problems to adversely impact upon the Government's ability to maintainmacro stability. This chapter focuses on the crucial objective of achieving macro stability.

L Historical Perspective

2. Jamaica has been attempting economic reforms since the second oil shock of the late1970s. Jamaica's reform efforts, spanning over fifteen years, were supported by a record high level ofdisbursements of more than US$1 billion under three World Bank SALs during 1981-85, five WorldBank SECALs during 1986-93, and twelve IMF programs during 1978-95- By 1986, some progress,albeit slow, was achieved under the SALs in reducing the size of government employment andcorrecting the overvalued exchange rate. But in several ways the economy in 1986, burdened with amassive foreign debt, was worse off than at the start of the first SAL in 1981. The SALs did not havea major positive impact because the excessive extemal financing encouraged a delay in economicadjustment. A higher level of progress was achieved under the five SECALs during the late- I 980s inthe areas of trade liberalization, phasing out 50 out of 330 public entities, reducing public sectoremployment, removing price controls and subsidies, introducing farm-gate prices for key export cropsand eliminating interest subsidies in the agricultural sector while moving from generalized foodsubsidies to more targeted assistance to the poor. The gradual opening up of the economy and theimplementation of some sectoral measures, in particular in agriculture during 1986-90, had an impactas reflected by the growth spurt of 5% per year during the same period. The fiscal and monetarypolicies, however, continued to be expansive and fueled inflation.

3. Moreover, there was little effort during the1980s in removing the deeper structural constraints Average Annual Inflation Rate,placed by inadequate regulatory frameworks in 1973-94critical sectors, rigidities in the capital and labor 80-markets, weaknesses in governance and public 60 -administration, and inadequate economic and social 40IZ 40infrastructure. Only recently has the Government R

being focusing on some of these longer-term e 20l

problems. o

4. After discontinuous and incomplete Yewadjustment during most of the 1980s, thecomprehensive reform program initiated by the current Government in 1989 began to accelerate thepace of reforms. This program was supported by the IMF through a three-year EFF, the IDB throughan investment sector loan, the Bank with a PSDAL and the Paris Club with a debt reschedulingagreement. All of these arrangements have now come to an end.

5. Under that reform program, most of Jamaica's economic targets were reached by June 1995.The consolidated public sector balances moved from a deficit of over 6% of GDP in 1989 to a surplusin each of the last three years, and the BOJ losses have recently been eliminated. Inflation was reduced

I

JAMAIC4: COUNTRYECONOMICMMEMORANDUM

to 1% per month by early 1995 from the high inflation of the 1991-94 period. The foreign exchangeregime was liberalized. The common external tariff had been lowered from over 100% in the late-1980s to a range of 5-35% now and most quantitative restrictions and trade monopolies wereeliminated. The telecommunications company, the two domestic airlines, and the four sugarcompanies have been sold to private investors. The railways and the petroleum refining companyhave been prepared for divestment and three privately-financed electricity generation projects aremoving forward. The extemal current account moved from a deficit of 5% of GDP by end-March1992 to near balance by end-1994. Private transfers and capital inflows more than tripled during thelast two years. While external debt remained high at over 800/o of GDP, the recent debt reschedulingsand the Govemment's repayments of its extemal obligations over time have reduced debt service from36% of total exports in 1993 to 24% in 1995. Gross international reserves reached about 5 months ofimports by June 1995.

Table 1: Jamaica - Key Economic Indicators, 1990-95

1990 1991 1992 1993 1994 1995pReal GDP Growth 5.5% 0.7% 1.4% 1.4% 0.8% 0.5%Per Capita GDP Growth 4.5% -0.2% 0.4% 0.4% -0.1% -0.4%Investment/GDP 19.7% 19.8% 19.3% 20.3% 22.0% 25.0%ExportsGNFS/GDP 53.7% 61.8% 66.3% 56.1% 60.1% 58.0%Balance of Payments: -10.6% -10.1% -2.4% -6.6% -0.2% -4.4%

Current Account Balance/GDPExt. DebtOutstandingand 104.2% 118.3 117.8% 90.9% 90.4% 81.0%

Disbursed (DOD)/GDP *Debt service/Exports # 30.4% 30.6% 42.2% 35.6% 27.9% 24.0%

UnemploymentRate 15.3% 15.4% 15.7% 16.3% 15.4% 15.4%

Population below Poverty Line 27.9% 38.9% 34.2% 28.4% na na

MEMORANDUM ITEMS (USSM):Total Net Exports (incl. tourism) 2328.3 2248.5 2295.5 2452.2 2548.0 2811.0TotalMerchandiseExports 1157.5 1150.7 1053.6 1044.5 1219.5 1400.0Bauxite/Alurnina Exports 728.4 655.9 559.8 524.0 610.7 710.6Tourism Receipts 740.0 764.0 858.1 942.6 919.0 954.0

NOTES: a. Medium and Long Term Debt, including IMF Debt; b. Exports, including goods, services andprivate btansfers, p = preliminary estimates.Sources: Governument of Jamaica, World Bank and IMF staff estimates.

IL Recent Economic Difriculties

6. Since July 1995, a combination of banking sector problems and slippage in economicpolicies has increased inflation sharply from the average of 1% per month during January-June1995 to an average of about 3% per month during July 1995 to March 1996. Underlying thisresurgence of high inflation is the continuation of large injections of money supply in the systemand the wage increases of over 50% (including back pay for two years) to teachers, policemen,and firefighters and more recently to civil servants (with an advance payment before Christmas of1995). Private sector wages have also increased correspondingly. Imports, mostly consumergoods, rose by 27% during 1995 as a result of demand pressures from wage increases and theBank of Jamaica (BOn) extending credit to meet the liquidity needs of the failing Century NationalBank (CNB). In addition, the failure of three small sized financial institutions in December 1994 andthe troubles of other financial firms publicly acknowledged during the past year, are exposing the

2

Achieving Macro-Stability and Removing Constraints On Growth

weakness of the financial sector and compounding the difficulties of economic management for theGovernment. The overall public sector surplus could dwindle in the near future if the remainingpayments to the civil servants, the costs related to the financial sector, the higher domestic interestpayments, and the losses of the public sector are taken into account.

7. Partly as a result of these developments, there was a slide in the J$ vis-c-vis the US dollarin 1995. To stabilize the J$, the BOJ injected US$93 million into the monetary system betweenSeptember and December 1995 by drawing down its international reserves. Also, money supplygrowth averaged about 35% in 1995, compared to the yearly target of about 10%. Despite thecorrection of the nominal exchange rate in 1995, the real exchange is still appreciated by over20%. Without adequate corrective measures, the external current account is projected to movefrom near-balance by end- 1994 to a deficit of about 6% of GDP by end March 1996. At present,nominal lending rates range from 55% to 60% and the T-bill rate is about 40%.

8. The recent bout of high inflation is pushing up nominal interest rates, putting pressure on theexchange rate, exacerbating the liquidity problems of the weak commercial banks, increasing domesticdebt servicing costs, eroding private sector confidence, and disproportionately affecting the incomes ofthe poor. The private sector agents now have a shorter-term horizon and thus prefer to importgoods for consumption or to invest in financial assets rather than invest in productive sectors.These short term macro problems are not only eroding the economic gains achieved by theGovernment during 1993-95, but also exacerbating the longer terms structural problems of lowgrowth, financial sector fragility, and the high incidence of poverty, crime and violence, and laborunrest.

ml Recurring Stabilization Cycle

9. During 1991-95, inflation averaged about 40% per year. Table 2 indicates the movement oftwo factors that underlie the recurrence of inflation during the past five years -- money supplygrowth of over 45% per year and spurts in public expenditures, including large wage increases toGovernment employees once every two years. The high inflation impacted upon the economy viatwo channels. First, it increased nominal interest rates and eroded real incomes and real wages inthe domestic economy. Second, inflation impacted on the real exchange rate and externalaccounts.

Table 2: Jamaica - Inflation Stabilization Cycle, 1990-95

1990 1991 1992 1993 1994 1995pM2 Growth 26.9% 54.6% 59.3% 39.9% 40.8% 33.0%M3 Growth 17.5% 51.5% 40.2% 30.5% 35.2% 35.0%Growth in Wages (in JS) 18.6% 32.6% 53.1% 79.2% 32.6% 30.7%Inflation (CPI) (end-period) 29.9% 80.2% 40.2% 30.1% 26.8% 25.5%Nominal Lending Rate (end-period) 32.4% 37.4% 42.9% 61.3% 58.0% 60.0%Nominal Exch. Rate: (JS=IUSS; end-period) 8.2 21.5 22.2 31.3 33.2 39.7Net International Reserves in months of non-bauxite imports 0.5 0.7 2.1 2.4 4.5 4.0

NOTE: p = preliminary estimates.Sources: Government of Jamaica, World Bank and IMF staff estimates.

10. During the past five years monetary policy was increasingly used to achieve severalobjectives, such as curtailing inflation, accumulating international reserves, maintaining the

3

JAMA4ICA: COUUNTR Y ECONOMIC MEMORA DUM

nominal exchange rate, reducing nominal interest rates, and providing liquidity support to thetroubled financial institutions. For example, during 1990-91, the policy was to accommodate thedeficits of the consolidated public sector. In contrast, the accumulation of unprecedented levelsof international reserves took place in 1992 and 1994, and stabilizing the nominal exchange ratebecame the policy objective during 1993-94. In 1995, the policy was partly driven by the need toprovide liquidity support to troubled commercial banks. The policy of foreign exchangeaccumulation through sterilization doubled the stock of domestic debt, in particular the short-termdebt during the past three years. The near substitutability of the short-term Government and BOJdebt with money showed up in an increase in money supply during these years. The keydeterminant of the expansion in money supply during the past few years was a 60% increase indomestic credit, mostly to the private sector. Spurts in public expenditures in the form of anincrease in wage bill in the summer of 1993 and in the latter half of 1995 also contributed to fuelinflation during those years.

11. While average inflation has been high, it has also widely fluctuated on a month by month basis,ranging from 0.8% to 4.3% per month. The volatility in prices is the underlying factor for frequentchanges in reserve requirements of the commercial banks. The high inflation and the high reserverequirements (47% now) have led to high nominal deposit and lending rates and widening spreadswhich put pressure on the portfolio of the commercial banks. The result of these high interest rates hasbeen an enormous '"et resource transfer" from bank borrowers to banks and from banks toprivate sector depositors. Had the authorities engaged in unsterilized purchases of foreignexchange or not purchased foreign exchange at all when the J$ started to strengthen during mid-1993 until end-1994, interest rates may have remained low and the magnitude of the problemfacing the banks would not have been so enormous.

12. The high and variable interest rates dampened investment in productive sectors and maderetums on financial assets more attractive. For example, growth in financial and insurance services for1994 recorded an unbelievable 47% (in constant prices) while growth in traditional sectors has beenlow or negative. High inflation and lower per capita incomes also led to reduced real incomes and putupward pressure on the need for larger and larger nominal wage demands. For example, teachers'wage increases for the April 1994-April 1996 period amounted to 87% (including reclassification);Govemment employee wages increased by 53%, while wage increases in the private sector averaged32% per year during the same period. The increasing interest costs, especially on domestic debt, andthe larger wage awards to civil servants are squeezing out the allocations on infrastructure repairs andmaintenance in Government's recent budgets.

13. A parallel chain of impact can be traced to the Government's policy of targeting the nominalexchange rate by using interest rate increases. As a result of maintaining the nominal exchange duringa period of high inflation, the real effective exchange rate appreciated by over 20% during March 1993and December 1995. This appreciation has led to lower growth in exports of goods during the pastthree years, in particular in exports of manufactured goods, and to increased growth in imports, mostlyconsumer goods. The lower export growth is one of the key factors for lower GDP growth during thepast few years.

4


IV. Achieving Macro-Stability

14. The Government's immediate objectives are to break the recent cycle of inflation and maintaininternal and external balance. It is trying to achieve this by curbing the money supply growth and isreviewing the two-year wage setting mechanism. Its also needs to change its mix of monetary-fiscalpolicies. One option is to generate larger fiscal surpluses than the current 3% of GDP while reducingmoney supply growth by ceasing BOJ advances to the financial sector, and slowing down foreignexchange reserve accumulation by letting the exchange rate be truly flexible (without BOJintervention). It appears that such a change in policy mix should be accompanied by wage restraint,including phased payment of wage increases to Government employees over several quarters so asto contain the wage bill increase in the coming fiscal year. As inflation is reduced, in addition toconsistently tight fiscal and monetary policies, the special deposit scheme that requires selectedcommercial banks and financial firms to maintain up to 200/o of their liabilities with the BOJ over andabove the ordinary reserve requirements, should be phased out and the reserve requirements oncommercial banks (currently at 47%) should be gradually lowered so as to slowly bring down domesticinterest rates. Also, a significant reduction in public sector domestic borrowing should ease thepressure on the domestic interest rates.

15. Larger Fiscal Surpluses. The overall consolidated public sector balances moved frompersistent deficits in the 1980s to a surplus in each of the last three years (Table 3). Underlyingthis fiscal performance was an improvement in Central Government operations (e.g., improved tax

Table 3: Jamaica - Public Sector Balances and Financing, FY90-FY96(As % of GDP)

1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96

Central Government -0.2 2.9 4.1 4.2 3.5 3.8 0.9Rest of general Government 1.2 0.8 0.0 0.9 1.2 0.4 0.0Selected public entities' -1.1 1.7 1.9 2.5 0.5 2.9 2.1BOJ losses -4.9 4.3 -5.2 -5.2 -2.0 -2.4 0.1Others -1.2 4.1 -1.2 -0.2 -1.7 0.1 0.0

Overall public sector balances -6.2 -2.9 -0.4 2.2 1.7 4.7 3.0

FinancingExternal 2.6 2.2 -1.2 -1.2 -0.3 -0.7 -2.2Domestic 1.2 -0.7 0.5 -0.9 -1.3 4.0 -0.8

* Banking system 2.0 1.5 3.9 4.0 -2.8 -5.8 -0.0* Other -0.7 -2.1 -3.4 -4.9 1.5 1.8 -0.8

Divestrnentproceeds 2.4 1.3 1.1 0.0 0.0 0.0 0.0a. Non-financial public enterprises.Sources: Governent of Jamaica and IW staff estimates.

collection, retrenchment of about 8,000 civil servants, and management of external interestpayments) and an elimination of BOJ losses by December 1995 from over 5% of GDP in FY93.However, interest payments on domestic debt now account for 8% of GDP compared to 5% onexternal debt. In addition, the full payment of the large wage increase to Government employeeswould amount to about 4% of GDP. Further, the Government has also taken over the large debt ofthe water company and the liquidation costs of the failed Blaise group, and is likely to bear the costs ofthe troubled CNB. These actions would erode the fiscal gains of the past years. The Government

5

JAMAIC4: COUNTRY ECONOMIC MEMORANDUM

needs to further tighten its fiscal stance to generate larger surpluses during each of the next twoyears. To achieve this larger public sector surplus, the Government needs to continue to reduce itsexpenditures on goods and services, on interest payments by keeping inflation low, and on wagesand salaries by phased payment of wage increases to Government employees over several quartersand by wage restraint in the coming years. These fiscal surpluses, if used to gradually reduce thedomestic debt, will reduce domestic interest payments allowing increased outlays forinfrastructure maintenance and the public investments required for growth.

Box 1: Jamaica - Developments in 1995 and early 1996

April 1995: The Government Budget for 1995/96 was presented to the Parliament. The budget was expansionary. Wagesettlements, with back pay for the last two years to Govermment employees, were estimated at 6% of the budget.Domestic debt stock increased by 570/o over the previous period. Total debt servicing amounted to 42% of the budget,with the interest payments on domestic debt far exceeding that on the external debt. The Consumption Tax was increasedfrom 12% to 15%. The size of the public sector was increased to about 34% of GDP.

July 1995: The troubles of the fourth largest conmnercial bank were publicly acknowledged. Monthly inflation rate jumpsfrom I% to 1.7% and later to 3%.

August 1995: Faced with financial sector problems and a slipping exchange rate, the Government announced a set ofmeasures to tighten liquidity and reduce pressure on the exchange rate. These included: (i) direct intervention throughBOJ sales of foreign exchange to authorized dealers; (ii) imposition of a Special Deposit Scheme that requiredconnercial banks and specified financial firms to maintain up to 20% of their liabilities with the BOJ over and above theordinary reserve requirements; (iii) increasing the reserve repurchase rate; (iv) reduction of the public sector balancesheld in commercial banks; and (v) closer monitoring of the cambios to ensure operation within specified regulations.

September 1995: The Paris Club rescheduling agreement ended. The Bank PSDAL was closed.

October 1995: A third political party, the National Democratic Movement, was formed by Mr. Bruce Golding.Concened about the low tourism growth in 1995, the Government stepped up tourism promotion to attract stayovervisitors and moved towards supporting equity and loan participation in the productive sectors through the issue ofdevelopment bonds.

November 1995: An anti-inflation package was put in place and net domestic assets were to contract significantly. BOJreduced the minimum share of daily foreign exchange purchases that cambios were required to sell to BOJ.

December 1995: The final review of the IMF EFF was left incomplete and a two-month extension of the closing date ofthe program was sought from the IMF Board. The monthly inflation for this month increased sharply to 4.3% as theremoval of a price subsidy on kerosene increased its price.

JanuLry 1996: Among other things, the Government agreed with the IMF to a tighter fiscal policy, phased payment ofwage increases to Government employees, ceased BOJ intervention in the foreign exchange market, and ending advancesto the troubled banks at below market interest rates. BOJ was to be given greater autonomy.

February 1996: The Finance Ministry approved the merger of the National Commercial Bank (NCB) and MutualSecurity Bank in order to strengthen the financial position of NCB. Also, fifteen weak building societies were identifiedfor closure. A social pact was initiated by the Government to build a consensus on economic policy. Under this contract,the Government would follow prudent economic policies, including a stable nominal exchange rate, the private sector isexpected to focus on creating more jobs, and the trade unions are expected to avoid restrictive work practices andnegotiate for wages based on increased productivity and not to past inflation.

March 1996: TMe IMF EFF is concluded. CNB continues to need BOJ liquidity support.

April 1996: The new budget is aimed to lower inflation to a range of 11-15% for FY97 (end March 1997) and generate apublic sector surplus of 3% of GDP by end-March 1997 without resorting to new taxes. The money supply growth sloweddown to 1% for the quarter ending March 1996, and inflation for March 1996 is lower at 1.6%.

16. Changes in Monetary Policy. The events of the 1990s illustrate the problems of economicmanagement in an open economy, such as Jamaica, that is subject to capital flows. The return ofcapital led to an increase in money supply during 1993-94, further fueling inflation as the Government

6


attempted to build intemational reserves and stabilize the exchange rate. When substantial capitalinflows (over I 0% of GDP) acted to appreciate the real exchange rate from mid-1993 until March1995, the nominal exchange rate was stabilized at J$33 per US$. Tighter fiscal policy, with a targetingof the nominal exchange and with higher reserve requirements and intensified open market operationsduring the past three years have kept interest rates up and slowed the growth in domestic creditand contributed to an expansion in net foreign assets of the monetary system. An analysis of themonetary components indicates a shift away from demand deposits and currency towards lessliquid money. Also, there has been a preference for holding foreign currency and foreign currencydeposits as reflected in increased growth in time deposits. The higher interest rates choked off realgrowth and made short-term financial instruments more attractive and leading to further capitalinflows. In such a situation, monetary policy effectiveness was reduced. Further, the targeting ofnominal exchange under a floating exchange rate regime, as done during 1993-94, and as nowenvisaged under the Social Pact initiative (see Box 1), would create rigidity in the functioning of theforeign exchange market and lead to appreciation of the real exchange rate and a weakening of thecountry's international competitiveness. As happened during the past few months, the overvaluedexchange rate raises devaluation expectations and makes consumer imports more attractive. Thewidening deficits in the extemal current account can only be sustained by the BOJ drawing down itsintemational reserves to maintain the nominal exchange or by extemal capital inflows or externalborrowing. The challenge is to manage the exchange rate and the capital inflows in a way that willprevent inflation and lay the basis for real growth of output. In 1995, the Government has sloweddown, as it should in a market-based exchange rate regime, on the accumulation of foreignexchange, but it would also have to halt its intervention in the foreign exchange market and allowthe market to play itself out. Over the next few months, it should phase out the special depositscheme, lower the reserve requirements, and immediately cease BOJ advances to troubledfinancial firms.

17. Improving Debt Management. Through several rescheduling and debt relief programs,and repayments by the Government, the total stock of external public debt has been reduced fromthe peak of 160% of GDP in 1986 to over 80% of GDP (US$3.4 billion) by end-1995. Externalinterest payments since 1990 have also declined steadily from 5% of GDP (23% of recurrentexpenditures) to about 4% of GDP in 1994. Jamaica is at a turning point in its external debtmanagement after having decided not to pursue further Paris Club rescheduling. The IBRD is thelargest creditor (15% of the total external debt). Other major creditors are the USA(13%),IDB(11%), IMF(8%), and Japan(7%). The Government is pursuing its current strategy ofdecreasing its outstanding external debt by a combination of decreased borrowing and seekingdebt forgiveness, conversion and swaps.' Jamaica would still have to rely on multilateral

' Several institutional changes are also required. Many Jamaican agencies maintain databases and compute futuredebt service payments with the possibility of different assumptions as regard to exchange rates and inflation. Onlyone database should be maintained and be located in BOJ (its current location). Both the MOF and the AccountantGeneral (AG) should have access to this database on a read-only basis. This would enable MOF to be an activeparticipant in the total debt management. BOJ currently does not monitor short-term debt (except for a few publicenterprises) nor private non-guaranteed debt. BOJ should be monitoring all debt and acquire the skills to becomeactive in asset (e.g. international reserves) and liability management so as to lower the cost of borrowing and hedgeits portfolio and reduce currency risk. To improve domestic debt management there is a need to regularize(quarterly) the issue of long term securities, and broaden the holding and structure of the securities. In September1995. the World Bank prepared a policy note that detailed the options available to the Government in managing itsdomestic and external debt.

7

JAM4ICA. COUNTRY ECONOMIC MEMORANDUM

institutions to finance much of its requirements. In addition, the Government wants to improve itsmanagement of foreign exchange inflows and external liabilities so as to minimize currency riskand lower the cost of borrowing.

18. In comparison, domestic debt has risen rapidly (now about 50% of GDP) and its debtservicing increased sharply during the last three years from about 5% of GDP to about 8% ofGDP (30% of recurrent expenditures) by end 1994. Preliminary estimates indicate that domesticinterest payments during 1996/97 could amount to a higher proportion of the latest budget. Thisrapid increase in domestic debt is attributable to the issue of debt to sterilize capital inflows and toretire BOJ losses. The high interest rates associated with inflation and new debt issues, mostly onvariable interest rates, have sharply increased current and projected interest payments. Moreover,the shorter maturities of the debt imply a substantial rollover in the next three to four years. Thisis one more reason for lower inflation and lower domestic interest rates.

2. Removing Long-Term Constraints on Growth

19. During 1991-95, GDP growth averaged less than 1% per year. The level of investment hasbeen relatively high over the years at over 20% of GDP. However, the quality of this investmentis a crucial issue that is discussed below.Notwithstanding the low population growth rate Annual GDP Growth, 1973-94(about 1% per year), the low GDP growth hasnot been adequate to raise the living standards of 4 :the population and make a significant dent on o .poverty. Growth in the 1990s has been low :because of the inflationary environment which nhas resulted in economic uncertainty. Therefore, 8 e:

a key challenge for the Government is to enhanceprivate-sector led growth and employment by yewlifting the major impediments to growth. This chapter (i) analyzes the trends in growth of output,employment, exports and other selected economic indicators; (ii) discusses the factors underlyingthe low GDP growth despite the high levels of investment; (iii) details the major constraints togrowth in the longer term, such as modernizing the capital and labor markets, improving criticalinfrastructure, improving the quality of the work force and the delivery of public services, andunburdening the informal sector; and (iv) discusses briefly the growth prospects.

L Growth Trends

20. Jamaica's growth performance was very uneven during the past fifteen years and averagedless than 2% per year. The economic structure is becoming more diversified as indicated by thetrade diversification index (share of top 3 commodity exports of bauxite, sugar, and bananas intotal exports) which has moved from 73% in 1984 to 55% in 1994. Contribution to GDP growthhas been essentially from the increase in stayover tourists and tourism related activities.Employment growth averaged about 2.2% per year and has come from tourism, construction,apparel manufacturing, domestic agricultural production, and the informal sector. The lowergrowth of the 1990s is correlated with higher inflation and the appreciation of the exchange rate,which has slowed down growth in stayover tourist arrivals and adversely impacted upon

8


merchandise export growth. Table 4 and Annex II provide details on selected economic variablesduring the past fifteen years.

Table 4: Jamaica - Fectoral Contribution, 1980-941980-85 1986-90 1991-94 1980-85 1986-90 1991-94

(Period average growth %) (Period average; % share of GDP)

Real GDP OutputTotal -0.1 4.9 1.1 100.0 100.0 100.0Services -0.2 3.4 0.8 53.0 45.5 43.6Agiculture 0.6 0.4 7.6 6.8 7.2 5.7Manufacturing -0.8 4.8 -2.2 18.3 20.2 18.9Construction -3.4 10.3 -1.4 7.9 10.0 12.5Transport 1.4 6.7 5.8 6.2 9.0 6.4Mining -8.3 13.7 1.1 8.2 7.1 9.0No. of stayover tourists 5.5 8.1 6.7 na na na

Employment ExportsTotal 2.3 2.7 0.8 48.0 50.5 61.1Services 0.4 5.4 4.9 12.8 17.3 34.0 B

Agiculture 3.3 -3.0 -2.2 1.7 1.7 7.8 b

Manufacturing 5.3 6.9 -7.7 5.1 7.2 6.0 cConstruction 1.7 11.4 4.0 na na naTransport 3.8 3.6 -1.2 na na 26.3Mining -2.5 1.4 2.4 18.4 14.3 15.5 d

Commercial bank--advances & loans29.3 29.6 23.810.5 10.6 12.73.8 3.0 1.76.4 5.9 3.35.2 6.2 3.93.4 3.8 2.20.1 0.1 0.2

ICOR 9.6 4.1 10.0Investment/GDP (%/o) 19.5 20.1 20.4Exports (GNFS)/GDP (%) 48.0 50.5 61.1Foreign direct inv./G[ P (%/6) 0.0 1.3 3.2Concessional loan/GE P (%) 4.6 1.8 0.9Gov't consumption/Gl)P(%) 19.2 14.9 12.1Inflation rate (%) 18.6 13.2 45.4No. of crimes per year 50282 47741 50651REER Index (1980=100) 93.1 68.8 56.7Terms of Trade Index (1980=100) 87.4 89.5 82.2

NOTES:a. Includes only tourism receipts.b. Includes rum; excludes sugar.c. Includes re-exports.d. Alumina, Bauxite, Gypsum.e. Travel+Transportation receipts.Sources: Government of Jamaica, World Bank and IMF staff estimates.

9


The main findings are:

* Labor (employment) contributed to over 75% of the output growth and the remainingcontribution was from changes in capital stock. The total factor productivity (TFP)growth in Jamaica is estimated at -0.65% per year for the same period. This negativegrowth is in sharp contrast to the 1% to 3% per year TFP growth in the faster growingdeveloping countries. Therefore, higher GDP growth would require positive and higherTFP growth rates in Jamaica.

* At the aggregate level, the level of investment remained relatively high at over 20% ofGDP per year, but detailed data on investment are not available.

* Tourism and related activities are the more dynamic growth areas. In particular thechanges in stayover tourist arrivals (mostly from Northeast and Midwest America, theUnited Kingdom and Canada) influenced the expansion of the economy. A depreciated J$has a positive relationship with tourism growth.

* Textile and apparel production and exports, which dominate the manufacturing sector,were a key source of employment in the ]980s but the manufacturing sector has beendeclining since 1989.

* Following major reforms in the sugar and banana sectors in the mid-1980s, these sectorsincreased their production volumes and foreign exchange earnings. However, theEuropean sugar and banana quotas were seldom fulfilled. Moreover, recent growth inproduction has come from coffee, cocoa, cutflowers, fruits, vegetables and tubers and hasled to increased employment and incomes in the rural areas.

3 Bauxite/Alumina exports while accounting for 22% of foreign exchange eamings,fluctuated largely from year to year as orchestrated by export prices. However, therestructuring of the industry in the 1990s appears to have enhanced its growth prospects.

* The informal sector (defined as self-employed at low skills and comprised of vendors,craftspersons and domestic workers) has been a major source of low-wage employmentgrowth and now accounts for 30% of the work force.

* Export competitiveness as reflected by the real effective exchange rate index was a keydeterminant in explaining the performance of export of goods and services during most ofthe period. During the 1990s, real wages have been increasing much faster thanproductivity.

* During this period, the impact of external shocks, such as the price increases in theimported oil during the Gulf War and the drop in bauxite/alumina prices in 1991-92, wasrelatively small at 0.6% of GDP per year.

* Low growth in the 1 990s appears to be correlated with higher inflation and lower growthin stayover tourist arrivals.

10


Jamaica - Trends in Export Earnings and Capital Flows

Export Earungs Ex rmE C pit Fla6vs2500- 80D

70D2000

603) Net P nvate

-A 500 ~~~~~~~~~~Trarnfers

MO 300 ~~~~~~~~~~~~~~~~~~~~~~~~~~Other Capital

_ 200 - - Direct500 -I IO/ vestnent

Agnculture 0 l OfficGrans

01~~~~~~~~~~~~~~~0~~~~~~

21. Growth in the Informal Sector. This sector in Jamaica is defined as small businessesemploying less than 10 workers each. Available estimates indicate that the growth rates of thissector's employment and income during the past fifteen years were over 5% and 2% per yearrespectively. In contrast, the formal sector's employment and GDP growth rates during the sameperiod were about 2.2% and 1.6% per year respectively. The latest available sample survey of1994 indicates that there are about 100,000 such small establishments in Jamaica, employingabout 174,000 workers or over 25% of non-agricultural labor. This is an increase from 80,000workers (38,000 establishments) in 1978 and 151,000 workers in 1990. The sector is dominatedby own-account workers (or sole proprietors) engaged in import and/or production and sale ofclothes and garments, food, furniture, plastic household items (cups, plates, buckets), toiletry,perfumes, jewelry, plastic footwear, and small electrical parts. To a lesser extent, activities in thetransport and services (e.g. repair, domestic services) sectors are also a source of employment and

2income.

22. The adverse economic conditions during the past two decades and the reduction in publicsector employment are two major factors explaining the increased activity in the microenterprisessector. The businesses may be categorized in two ways: (i) those operated by the poor forsubsistence purposes; and (ii) some establishments that are relatively stable and financially viablefamily business as having the potential to move up to the small-scale end of the formal sector.Most entrepreneurs in this sector exhibit a high level of commitment to their businesses. Women

2 The research papers by Claremont Kirton of the University of West Indies, Mona Campus, Jamaica and thebackground documents on the microenterprises sector provided by the USAID and the Government of Netherlands'Microenterprises Project offices, both based in Kingston, served as crucial inputs for our understanding of thedevelopments in the informal sector (see also Annex 11).

11

JAMAICA: COUNTRY ECONOMICMEMORANDUM

operate at the smaller end of the sector compared to males, and are concentrated within anarrower range of activities, such as the sale of merchandise.

23. Factors Underlying the Low Growth in the 1990s. Investment data from national accountsare not available, in particular on sector specific investment. Therefore, imports of machinery andequipment and construction materials are taken as an estimate of investment levels. Data oncommercial banks' advances and loans instead serves as a good proxy for sectoral investment. Thuscalculated from imports data, aggregate investment levels have consistently b; en over 20% of GDP,despite which real GDP growth has averaged about 1% per year during 199 -95. One of the mainreasons for low growth during the past five years is the high inflation of al.out 40% per year (seeBox 2) which, together with doubts about economic reforms, increased economic uncertainty anddiverted private resources towards short-term financial instruments with- hi -her returns. The highinflation also led to substantial appreciation of the real exchange r.ite (as a stable nominalexchange was maintained). The slow down in growth of stayover tour:,t arrivals and the lowergrowth in merchandise exports, in particular manufacturing exports ilso coincided with theappreciation in the real exchange rate.

Box 2: Correlation of Inflation and Growth in Jamaica

A recent Bank study by Bruno and Easterly on the implications of high inflation on economicperformance in a large number of developing countries found that inflation above 40% per year isusually strongly associated with very low or negative real GDP growth. This relationship is alsoconfirmed in Jamaica during the past decade.

1986-90 1991-94Real GDP Growth (% per year) 4.9 1.1Inflation (/O per year) 13.2 44.3

24. High real lending rates (ranging between 22-37% during the last 3 years) and a highincidence of labor unrest served to dampen investment. The efficiency of investment in Jamaica isvery low because of the structural impediments detailed below. In addition, a significant increase ininvestment in the housing stock did not contribute to growth. The high crime rate is also imposingcosts on investment.

IL Structural Rigidities Impeding Growth

25. Experience in other developing countries indicates that even after successful stabilization,sustained growth is neither automatic nor easy. In the case of Jamaica, the pending reformagenda aimed at attaining a virtuous circle of achieving stabilization with higher growth and risingopportunities for the poor is large. The Government has shown a considerable politicalcommitment for tackling the reform agenda since 1989. It now needs to continue to resistpressures to return to macroeconomic populism of the past.

26. In the short to medium term, the Government's reform efforts should focus not only onmacroeconomic management (detailed in Chapter 1) but also on removing rigidities as detailedbelow. Factors limiting growth include deficiencies in the financial sector, rising labor costs andlabor market rigidities, infrastructure bottlenecks, undue business costs on small businesses,

12


inadequacy of infrastructure, weaknesses in public administration including in maintenance of lawand order, and the declining quality of the work force.

27. Modernizing the Financial Sector. During the past one year, four financial groups havepublicly declared their troubles.3 The Government took over the liquidation of the Blaise group inorder to protect the depositors because there is no deposit insurance in Jamaica, nor is there alegal precedent that could determine the process of reimbursing the depositors. The Govemmenthas recently agreed to pay the depositors 90% of the outstanding amount. The troubledcommercial bank is still operating with the previous management and ownership being in controlof the bank. The BOJ has advanced this bank about J$4 billion at an interest rate of 33% per year(while market lending rates range between 50-60%) during the past two years to shore up thisbank's liquidity. Neither the Finance Ministry nor the BOJ has yet developed an effective actionplan for dealing with the troubled bank. In all, these troubled financial institutions are estimatedto cost the Government about US$200 million (4% of GDP).

28. The bad management of these financial groups has been public knowledge for a couple ofyears. The Government, by supporting these failing institutions, is penalizing the better managedbanks (through the special deposit scheme) and is setting up an incentive for other firms to declareinsolvency and seek the Government's support. The roots of the financial sector problems arealso imbedded in the conduct of monetary policy, the structure of the financial institutions, and theinadequate regulations and supervision of the sector (see Annex I). BOJ's weak financial positionwith respect to losses restricts the effectiveness of monetary policy. For example, reserverequirements have been kept high at 47% and over with frequent changes in recent years not onlyto restrain the growth of money and credit but also to provide income to the BOJ to cover itslosses in other transactions. Commercial banks are currently required to maintain 25% of theirassets in non-interest earning 'cash" reserves and another 25% in Government securities, theliquid assets requirement (LAR). The high reserve requirements faced by the commercial banksand the high intermediation costs are important elements in the high lending rates. Differentialreserve requirements for different institutions (e.g. 17% in cash reserves for financial institutionscompared with 25% for banks, and 1% for building societies) have encouraged disintermediationfrom commercial banks to merchant banks during the early 1990s and more recently frommerchant banks to building societies. The number of unregulated building societies increasedfrom 6 to 33 and theirs assets have been growing rapidly during the past two years.

29. The result of real high interest rates has been an enormous 'het resource transfer" frombank borrowers to banks and from banks to private sector depositors. The Govemment shouldtherefore move rapidly to bring down inflation and lower interest rates by changing the fiscal-monetary policy mix (Chapter 1). At the same time, the strengthening of the regulatory andsupervisory frameworks should be undertaken at a furious pace.

30. The financial sector reforms should include the following actions and could be sequencedas below:

Upon the Government's request, the Bank is preparing a financial sector review.

13


* in the short term of a few months, the need is to achieve economic stabilization bybringing down inflation; facilitate the restructuring of the failing or troubled firms throughplacing such firms under 'tonservatorship", facilitating their merger with relatively soundcommercial banks, or accelerating their liquidation; identify roll-over of large loans formonitoring, and ensure capitalization of 8% of assets. Such policies could restoreconfidence in the system;

* at the same time, there is a need to ensure the continued functioning of the financialsystem while taking strong measures to contain losses and taking decisions onstrengthening the management or the capital base of selected banks after determining theirfinancial condition,

* in the medium term of one to two years, the Government should improve financial sectorprudential norms and standardize the asset/loan quality; and

* in the medium to longer term, the supervisory system should be strengthened, both in itsstructure and in its capacities, including increasing the staffing adequacy (both in qualityand number of staff) of the supervisory agencies, upgrade the information systems used asinput for off-site analysis, improving the auditing standards for financial institutions andproviding sufficient powers to the supervisors to be able to enforce the norms. A depositinsurance scheme with reasonable thresholds should be introduced after the supervisionsystem is strengthened. The Government's recent decision to provide BOJ with greaterautonomy would enable BOJ to conduct a consistent monetary policy while letting it bemore effective in financial sector reforms, and would also improve the asset and liabilityportfolio management.

31. Improving the Functioning of the Labor Market. Firms in the formal segment of themarket do not appear to be severely constrained in their employment and wage decisions by labormarket regulations pertaining to minimum wage, job security and severance pay. Unlike othercountries, Jamaica has no cap on the total amount of severance an employer may end up paying toa dismissed employee. Such a cap existed before 1986, when 26 years of service was themaximum recognized seniority. However, labor productivity has been low during the pastdecades. While unionization (only 24% of total wage-earners are unionized now) is not a factorin employment rigidity, it has been reported that poor work habits, poor management, and thedismal condition of public transportation are factors contributing to low productivity. In addition,the high frequency (almost one industrial dispute per day) and the intensity of labor conflicts,coexistence of several trade unions (each of whom separately negotiate wages on behalf ofdifferent groups of workers) leads to coordination failure and a disruptive labor market.4 As aresult, average work days lost, mostly due to wage and employment disputes, are reported to bemore than 90,000 per year -- which translates to a loss of 3% of GDP per year.

32. The wage setting mechanisms in force in Jamaica have been a destablizing factor in recentyears. In unionized firms and sectors, most wage adjustments are negotiated between employers

4 The Bank has prepared a Labor Market Issues Paper in September 1995 as an input to the Labor Market ReformCommittee established by the Government in March 1995.

14


and trade unions for a two-year period. Although the standard agreement includes a wageincrease in each of the two years, the amount of the second-year increase is not contingent on anylocal or macroeconomic development. Moreover, the amount of the wage increases is much moreheavily influenced by past inflation than by expected inflation over the life of the contract. Thefact that most wages in the unionized sector of the economy are set for a two-year period meansthere is nominal wage rigidity in the short run. In a context of short-run nominal wage rigidity,real wages decline when the inflation rate goes up, and increase when prices stabilize. Largefluctuations in the cost of labor are detrimental to an efficient allocation of resources. Over thereal wage cycle created by inflation and stabilization, there is more hiring and firing than would bewarranted, had the real wage remained stable. According to qualified observers, many recentwage settlements were followed by redundancy, as employers facing higher labor costs had to cutdown on staff. Additionally, these large real wage fluctuations serve as a source of sore industrialrelations.

33. Although unionization is likely to be one of the main determinants of differences inemployment flexibility across sectors, relatively little is known about union membership inJamaica. Within Jamaican firms, several trade unions may coexist, with each of them separatelynegotiating wages on behalf of different groups of workers. Rivalry among trade unions at thefirm level is, to some extent, a reflection of rivalry among trade union confederations at thenation-wide level. The frequency and harshness of labor conflicts, the disproportionate level ofwage claims by unions, and the high level of actual wage settlements, could partly be due to unionrivalry. Labor issues took more than one third of the time of Cabinet meetings over the last fivemonths. The 'ho victimization" rule, which means that after the labor conflict is over, theemployer takes back all the striking employees and the slow pace of dispute resolutionsmechanisms in force are two other reasons for the increase in the frequency and duration ofstrikes. The key issues are to revise the two-year wage bargaining mechanism so as to speed upthe process and provide for a binding arbitration if needed, to provide for exclusive bargainingfights to unions and management at the firm level, and to devise altemative mechanisms to avoidwork stoppages. The Labor Committee has recently presented the Government with an InterimReport detailing its recommendations to improve the labor market functioning and the employee-employer relationship. The Government's recent initiative towards a Social Pact is also anoteworthy step in controlling inflation and in enhancing the employee-employer relationship.

34. Providing Supporting Infrastructure. The inadequacy of infrastructure facilities is a majorconstraint facing the productive sectors (and is also impacting on social development). The tightfiscal position of the Government, combined with weak administrative capacity to implementpriority projects, has resulted in a lower than desirable level of public investment during the pastfifteen years. Despite higher levels of budgetary allocations for investment, less than 3% of GDPper year in projects are implemented in economic and social infrastructure. For example, theabout 50% of the existing road network is estimated to be in poor condition. About 25% of thepopulation is not served with potable water and about 15% do not have sewerage facilities.Water shortages, inadequate sewerage facilities and the lack of an adequate road network haveimpacted adversely on production and limited the growth of tourism. Similarly, the inadequaciesin the operation of the urban public transport system, especially in some poor communities, aregreatly restricting the mobility and employment opportunities of the poor.

15

JAM4IC4A. COUNTRY ECONOMIC MEMORANDUM

35. Additional investment requirements over the next fifteen years are estimated at US$600million in the power sector and US$1 billion in the water sector. The infrastructure investmentdemands are large and the public sector has neither the resources nor the capacity to undertakethese investments. To entice private investors, a clear regulatory framework is essential.Although Jamaica has industry-specific laws for most infrastructure areas, they are often datedand require review and possible amendments. Progress is most advanced in the electricity sector,where a general legal framework is compatible with private participation. In water sector, theexisting legislation provides for a monopoly to the National Water Commission and there is nolicensing system in place to support private participation in this sector. However, theGovemment is keen to privatize the power company and let the water company be privatelyoperated. Significant work also needs to be done to improve the frameworks for airports, portsand railways to enhance private participation.

36. Therefore, the Government needs to: (i) increase its capacity to maintain and rehabilitatecritical infrastructure and also execute its public investment program; (ii) ensure the adequacy ofregulatory frameworks in critical sectors in time for the National Investment Bank of Jamaica(NIBJ) to leverage private participation in ownership and management of public entities, such asthe water company, power generation and transmission, free zone management, airport termninalsand ports (the Government should consider use of guarantees, management contracts, leases andconcessions); (iii) work with the private sector franchisees in adjusting the bus fares and makingexplicit the subsidies, if any, to achieve a financially viable system, while regulating the ownershipand operation of the urban transport system, and (iv) rapidly divest or lease public lands, includingagricultural land, through an open and transparent process as recommended by the Government'sGreen Paper on Land Policy.

37. Modernizing the Public Sector. The public sector accounts for over 35% of GDP.Despite the recent retrenchment and privatization, there are over 110,000 public sector jobs(76,000 in Central Govemment, including 35,000 in the civil service and another 40,000 instatutory bodies and public companies) accounting for 11% of total employment.5 Theadministrative capacity is weak and this is adversely impacting upon the performance of theGovernment, especially to maintain and provide basic economic and social infrastructure, tosupport the poorer segments of the population and to maintain law and order. All this acts as adrag on private sector participation.

38. The Government is considering reforms at three levels-the Central Government, theLocal Govermment and the smaller communities. Under the Government's 1991 FinancialManagement project and the 1994 Tax Administration Project, the public sector is beingstrengthened. Under the Public Sector Modemization Project, currently under negotiation, theregulatory and supervisory agencies are to be strengthened and several ministries/departments areto be restructured in phases with greater autonomy to be given to them. As part of the LocalGovemments reform and with the support of Bank's Parish Infrastructure Project, moreresponsibilities and revenues are to be devolved to parish authorities although the degree of

5 The Bank in collaboration with the Government prepared a Public Expenditure Review in 1995. This analysis isto be continued to track the trends in sectoral and functional allocation of public finds, and to serve as a useful toolin budget preparation and conduct of public policy.

16

.4chieving facro-Stability and Removing Constraints On Growth

decentralization remains an issue to be resolved. Finally, the Government needs to support thestrengthening of the efficient grass root community organizations and social NGOs.

39. As mentioned in para. 5 above, the Government, since 1989, had taken several actions todevelop an environment that is conducive for private sector participation. This Government iscommitted to further expanding the role of the private sector by improving the country'sregulatory framework (e.g., the Fair Trade Commission and the Office of Utility Regulationcovering power, telecommunications, water and urban transport sectors have been established).Apart from this, the amendments to the Security Act of 1993 have to be passed by theParliamentary Legislation Committee and regulations need to be enacted within the next fewmonths. The regulations pertain to the criteria and applications for licensing, registration fees,disclosure requirements for issue of new securities and conduct of business between dealers,investment advisors and their clients. Similarly, the amendments to the Companies Act of 1965aimed at modernizing the operations, reorganization and the liquidation of companies should beenacted into law within the new few months.

40. In some instances, public policies and institutions are creating undue business costs, suchas fragmented processes and locations for registration of businesses, statutory tax obligations andother regulations. Together, these frequently constitute barriers to establishing and maintainingsmall businesses in the formal sector and perpetuate a vicious circle of informality. The benefitsof informality, such as non-payment of taxes, are very tangible to entrepreneurs in their immediateenvironment. However, among other things, informality inhibits firms from expanding their clientbase, denies them from serving certain markets (e.g. insurance companies require formal status offirms that provide auto repairs to beneficiaries), does not allow direct import and export bybusinesses, prohibits claiming General Consumption Tax credits on used inputs, frustratesobtaining credit from the formal banking system, and may deprive benefits provided under laborlaws, such as minimum wages, leave, overtime and severance pay.

41. Since the mid-I 980s, the Government has tried to include small business entrepreneurs, inparticular the traders (also called higglers or hucksters) into the formal sector by buildingshopping plazas, starting a process of registration of businesses, issuing tax compliancecertificates and facilitating credit access. In recent years, the Government has increased its interestsubsidies to this sector. Under the Government's interest rebate program, public funds arewholesaled through the two development banks, which lend at an interest rate of 12% per year toaffiliated institutions including commercial banks, credit unions and cooperatives. TheGovernment has established a ceiling of 17% interest to be charged to the final borrower underthis program. The Government subsidizes the spread of 5%. The program has been slow becauseof the relatively high interest rates, low spreads that are not profitable to the financial institutions,and the cumbersome paper work required by the Government while claiming the rebate. About30-40% of micro finance is estimated to be at risk of delinquency. Poor appraisal and loanmonitoring by lending institutions, rather than any external factors, are said to be contributing tothese delinquency rates. Financing is also taking place through credit unions and NGOs at higherinterest rates of 20-25%, frequently supported by the microenterprise programs set up by bilateralagencies. However, the combined loan portfolio among the main NGOs is estimated to be smallat US$7 million for about 3,000 clients As such, there is a substantial unmet credit demand.

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JAMAICA: COUNTRY ECONOMICMEMORANDUM

42. The Government should consider outlining a policy framework for development of thesmall business sector. Such a policy framework should include: (i) reforms to reduce the businessoverhead costs of Govemment possibly through one-stop shopping for registration, certificationand tax collection; (ii) support to small business development through provision of factory/officespace and through services in planning, accounting, and packaging; and (iii) improving theexisting credit delivery mechanism through simplifying credit procedures, through groupguarantees or risk-pooling, by improving the skills of credit officers in the financial intermediaries,and by expanding the involvement of formal banking institutions.

43. The Government, in collaboration with the major bilateral and multilateral institutions, has6recently detailed an action plan to improve project implementation. Based on the

recommendations of this joint portfolio review, the Government in the short term has agreed torevise the civil works contracting procedure, raise the threshold of Cabinet approval of civilworks, and improve the monitoring of disbursements and the process of allocation of funds toimprove project implementation. In addition, the Planning Institute of Jamaica (PIOJ) shoulddevelop a capacity to review the public sector investment program so as to integrate the projectsand programs with the development objectives of the Government.

44. Any economic growth strategy for Jamaica should include an effective anti-crimecomponent. Jamaica has the highest violent crime rate in the Caribbean and is linked to povertyand drugs. Violence related to strong-arm tactics to ensure political support is on the decrease.The high crime rate and violence is a deterrent to tourists and to private investors. It adds to theeconomic uncertainty and imposes heavy costs on investments to ensure adequate protection oflife and property. The Govemment is reforming the penal system while emphasizing developmentof skills among prisoners, and is deploying its security forces to assist the police in maintaininglaw and order. Current efforts to address crime in Jamaica include: (i) organizing a Special Anti-Crime Task Force (SACTF) which concentrates on recovering firearms and arresting gun-tottingcriminals; (ii) encouraging Community Policing, (iii) recruitment of 100 Tourism Liaisonpersonnel trained to work in resort areas, such as Ocho Rios, Port Antonio, Montego Bay andNegril; and (iv) mounting of a special operation since May 1994 to counteract gang-relatedviolence. The Government has to step-up its efforts in this area through additional resources. Inaddition, regional security arrangements with the USA and with other countries in the regionwould be required to stop drugs traffic.

45. Improving the Quality of the Work Force. While rapid changes in the intemationaleconomy are expected to open up newer areas, these potential growth paths, includinginformation-related services, are highly dependent on technical and managerial capacity and a highquality of labor that is oriented towards adopting the use of new technologies in the productionprocesses. Labor productivity in Jamaica is relatively low stemming in part from deficiencies inthe education and training system. The state funded and operated public education system hasbeen quite successful in achieving almost universal access to primary and secondary schooling.However, the quality of education has been declining during the past decade as a result of reducedpublic outlays on education during the 1980s and because most of the outlays (98%) are

6 The Bank's portfolio management strategy note of March 1996 details the actions necessary to improve projectpreparation and implementation.

18


expended on teachers salaries and other emoluments. Therefore, supporting inputs such asteaching aids, equipment and laboratories are not sustained.

46. The Government policy is to reallocate educational resources to strengthen the pre-primary and basic education (grades 1-9), while implementing cost-sharing above this level.Educational reforms are designed to achieve greater equity in the system by improving quality atthe basic level that is accessed by the bulk of the population. Through the Reform of SecondaryEducation (ROSE) project, the Government is improving the quality of education in grades 7-9and upgrading upper secondary schools. The Government's education strategy and policies aregenerally agreeable to the Bank. There are some indications that the reforms are having positiveresults. For example, there is a steady increase in the proportion of secondary students passingthe CXC exams from 52% in 1991 to about 65% in 1994.

47. In the past, many skilled and educated Jamaicans migrated to North America and theUnited Kingdom. With an unemployment rate (broadly defined as the proportion of allunemployed people, whether looking for a job or not, to the total labor force) of about 15% now,there is a large pool of unskilled and often uneducated workers waiting to be involved invocational training. The Government estimates that 67% of new job-seekers do not have anycertification. The other area of critical manpower need is in management, where absence oftrained managers is a disincentive to foreign and domestic private investment. The Governmenthas been innovating with several programs. Approximately 7,000 people graduated from theGovernment's National Training Agency (NTA) and Human Employment and Resources TrainingTrust (HEART) skills training institutions (7 academies, 13 Vocational Training Centers and oneAutomobile Training Center) in the past five years. In addition, about 2500 youth benefited fromon-the-job training. Increasingly, training in secretarial and commercial services is offered byNGOs and community groups.

ILL Medium Term Growth Prospects

48. The list of pending reforms is long and would require intense and sustained efforts of theGovernment. The Government needs to establish clear priorities for the short to medium term(see para. 64). It is cognizant of the rapid changes in the external environment with thecompletion of NAFTA (deferral of Caribbean Basin Initiative parity), the increased competitionfrom Latin American banana producers, the gradual erosion of preferential prices for sugar in theEuropean Market, and increased competition in tourism from Mexico, Cuba and the DominicanRepublic. Alumina prices are also projected to be slightly lower than the 1993-94 prices byindustry analysts. Around the year 2000, uncertainty about the renewal of the preferential tradearrangements in sugar and banana by the European Union could adversely impact upon theproduction and exports of these commodities. The end of the IMF program and the Paris Clubrescheduling arrangement means an increase in external repayment obligations of about US$200million per year during the next few years to the IMF and bilateral agencies.

49. Barring unforeseen circumstances and provided the above-described policy agendaincluding adequate levels of public investment of at least 7% of GDP per year is implemented,real GDP growth is projected to increase from the current estimated growth of 0.5% to about 2%per year in the short term and about 3% over the medium term. Growth is projected to comefrom increased tourist arrivals to a large extent and to a lesser extent from merchandise exports,

19

JAM4AC4: COUNTRY ECONOMIC MEAMORANDUM

such as garments, coffee, papayas and cutflowers. Some growth in information and financialservices, albeit from a small base, is also projected. The overall surpluses of the consolidatedpublic sector are likely to be lower than the current 3% of GDP because of the large wagepayments to civil servants, the higher domestic interest payments, and the payments of aboutUS$200 million per year to the bilateral and the multilateral agencies that have to made duringFY97-98.

50. Because of the drying up of external grant financing and the negative net transfers tomajor multilateral and bilateral agencies expected during FY97-98, a large part of Jamaica'sresources must come from domestic savings and from foreign direct investment. Privateinvestment is therefore projected to be around the current levels. The extemal debt stock willcontinue to decline rapidly due to the net negative transfers of about US$150 million per year tothe bilateral and multilateral agencies. Therefore, external debt service will be more manageablein the medium term.

Table 5: Jamaica - Macroeconomic Projections, FY96-FY2001Key Indicators FY96 FY97 FY98 FY99 FY2000 FY01Growth of Real GDP (%) 0.5 2.0 3.0 3.0 3.5 3.5Growth of Real GDP p.c. (%) -0.5 1.0 2.0 2.2 2.5 2.5Consolidated Public Sector

Balance/GDP(%) 3.1 2.8 3.3 2.8 2.0 2.1

Investment/GDP (%) 26.4 26.4 26.8 26.8 26.9 26.9Public 7.1 7.8 8.1 8.6 9.1 9.6Private 19.3 18.6 18.6 18.2 17.8 17.3

National Savings/GDP (%) 23.7 27.5 29.9 29.0 28.2 27.7

Exports/GDP(%) 71.4 72.5 73.5 73.2 72.9 72.9Imports/GDP (%) 84.2 80.6 79.5 79.9 72.9 72.9BOP Current Acct Bal./GDP (%) -2.7 1.1 3.1 2.1 1.3 0.8Total External DOD/GDP(%) a/ 102.0 101.9 92.8 85.5 79.6 75.2Interest on Ext. DebtGDP(%) 5.1 5.1 4.6 4.1 3.7 3.5Int. on Ext. Debt/exports (%) 5.9 5.9 5.2 4.8 4.3 4.0

Debt Service/Exports (%) 15.4 16.5 14.3 13.0 12.5 12.4a' includes short tern and private non-guaranteed debt.Source: World Bank staff projections.

3. Update on Poverty Reduction

51. Jamaica's high inflation, in particular in 1991, increased the incidence of poverty fromabout 28% of the population by end 1990 to 39% by end 1991. The low growth during the pastfive years made only a marginal dent on poverty. Higher rates of growth and lower inflation arecrucial elements in poverty reduction. This chapter (i) identifies the characteristics of the poor inJamaica and updates the recent trends in poverty; (ii) assesses the Government's strategy andprograms towards poverty reduction; and (iii) suggests some changes in policies and programs toprovide better services to the poor. Information on poverty is based upon The Survey of LivingConditions (SLC) that has been done at least once a year since 1988, with support from the Bank.Along with the Labor Force Survey (LFS), the SLC provides a valuable database for evaluatingthe effects of past policies and for enhancing the design of future policy.

20


L Characteristics of the Poor

52. The SLC for 1993 estimates that about 28% of the population lives below the povertyline. About 60% of the poor live in rural areas, while 21% live in the Kingston Metropolitan Area(KMA), mostly concentrated in Kingston and St. Andrew parishes, and the remaining 19% live inother towns. Rural poverty is characterized by an under-productive small farm sector, low levelsof education and an underdeveloped physical and social infrastructure. Increasingly, the ruralpoor are drifting to urban areas in search of better economic opportunities and this is resulting inovercrowding in urban (low-income) housing settlements and mushrooming of squattersettlements, particularly in Western Kingston, East Downtown and AlIman Town areas. Thedemographic distribution indicates that most of the poor are children and youth. About 61% ofthe poor are below 25 years of age (children below 14 years comprise 40% of all poor) andpersons over 60 years comprise about 13%. Women comprise 51% of the poor. About 80% ofthe poor were employed in 1993-94 and the majority of them are farmers, agricultural laborers,domestic servants, street vendors and craftpersons. Among the employed poor, education tendsto stop at the primary level and each employed active member has about 3 dependents.

53. Urban poverty and Table 6: Jamaica - Consumption of the Poor, 1958-94unemployment contribute to the SHARE OF THE POOR INDEXt'OFPER CAPITA

country's crime and violence CONSUMPTION (l 988= o00)Bottom Next All Bottom Next

problem and creates obstacles Year quintile quintile Jamaica quintile quintileto public sector services 1958 2.2 6.0 83

reaching the poor. For 1971 2.0 5.0 110 41 56example, recent violence in 1975 4.1 9.0 123 94 112

one Kingston community has 1984 4.2 9.5 102 80 98led to the closing of a primary 1988 5.4 9.9 100 100 100

1991 5.8 10.5 83 107 106school that served about 1200 1992 6.5 10.8 90 120 109students. Similarly, in some 1993 6.3 11.1 93 117 112poor communities, public 1994 6.4 10.8 105 119 109transportation does not even Source: Planning Institute of Jamaica and Statistical Institute of

operate because of violence, Jamaica.

thereby restricting greatly the mobility and opportunities of the poor.

II. Recent Trends

54. The increase in the numbers of people below the poverty line mainly came with themacroeconomic instability of 1991. Average per capita consumption declined by about 20% inreal terms in 1991 due to high inflation, but recovered somewhat in 1992 and 1993 followingsubstantial wage increases in the public and private sectors in those years. By 1994, per capitaconsumption was just on par with 1990 levels. However, consumption levels since 1988 haveincreased significantly among those in the lowest quintile, indicating a decrease in the severity ofpoverty and an increase in the effectiveness of the social programs. Distribution improved in partbecause agricultural production increased by over 10% from 1988 to 1994; all of which increasecame from production for the domestic market, in which most small farmers are involved.

21

JAMAICA. COUNTRY ECONOMIC MEMORANDUM

55. The SLC for 1993 also indicates that real per capita consumption in the Kingston MetropolitanArea was 3.3% higher than in 1990, while in rural areas the increase was marginal (0.9%/o) during thesame period. Other towns, however, lagged behind by as much as 7.3% in 1993 over 1990. TheseSLC findings are consistent with the earlier rounds of the survey. Expenditures on food, clothing and

footwear account for about two-thirds of the percentage share in total consumption. The mean per

capita consumption of a male-headed household was J$35,516 compared with J$29,436 for a female

headed household. The share of clothing and accessories in total consumption was higher for female-headed households, while the share of transportation was higher for the male-headed household.

Table 7: Jamaica - Aggregate Estimates of Poverty, 1988-94(percentages)

Aug. May Nov. Nov. Nov. Nov. Nov. Nov.Indicator 1988 1989 1989 1990 1991 1992 1993 1994

Percent poor 29.8 29.2 26.9 27.9 38.9 34.2 28.4Poverty gap index 10.0 9.8 8.8 7.9 13.7 10.6Poverty severity index 4.7 4.4 3.9 2.9 6.6 4.4Average per capita annual 7.3 7.8 8.1 7.6 6.1 6.6 6.8 7.7consumption (thousands of J$ in1990 prices)

NOTE: The above table displays indicators of poverty over time for Jamaica, using three Foster-Greer-Thorbecke (FGT) measures. The headcount index measures the prevalence of poverty and is the percentage ofthe population that is poor. The poverty gap index measures the depth of poverty and calculates the meanproportionate distance of the poor's income (or consumption) from the poverty line. The severity of povertyindex puts greater weight on the incomes of the poorest individuals; a (small) transfer to a poorer persondecreases the seventy of poverty more than the same transfer to a less poor person. The measure of welfareused here is household consumption per capita, which is preferable to income as a measure.Sources: POVCAL program; means and decile data are from the Planning Institute of Jamaica and theStatistical Institute of Jamaica.

11L Government Strategy for Poverty Reduction

56. High inflation and low growth are keeping the level of poverty stubbornly high despite the

the Government's best efforts through sixty social programs. Public resources are spread too thinacross a large set of social programs leading to some confusion among the poor about theireligibility and access and to some inefficiency in providing services to the poor. The Governmentis taking steps to improve the coordination among various agencies dealing with the social

programs. In addition, the Government needs to be more cognizant of the private safety nets in

the form of remittances from abroad, and support from social groups (churches, voluntary

agencies and community groups) in design and delivery of the social services.

57. To tackle poverty, the Government has developed a four-pronged strategy-increasing

broad-based growth, increasing the earning power of the labor of the poor, increasing theeffective supply of labor, and strengthening programs targeted to the poor. Thefirst part involves

expansion of output, employment and incomes. It include policies for accelerating sustainable

growth, for assisting the poor by increasing their access to productive assets, raising the return onthese assets, and raising the quality as well as the number of jobs available. The main assets

owned by the poor are labor and, in rural areas, small parcels of land. Since most of the poor are

located in rural areas, effective rural development is the key to poverty-reducing growth.

22


Sufficient urban demand for labor is also important to ensure a continued and sustained reductionin poverty. The second part involves strengthening basic education, at both primary andsecondary levels, and strengthening job training while improving access for the poor. Reforms ofthe education and health sectors are being undertaken to achieve this. The third part of thestrategy involves improvements to transportation infrastructure, linking the poor in the rural areasand in the depressed areas of Kingston with opportunities for employment and with markets forsmall-scale farming and manufacturing goods. The fourth part involves improved targeting offood programs and improving the access of the poor to social programs.

Box 3: Urban Poverty in Jamaica

A recent Bank study on urban poverty looked beyond traditional measures of poverty lines and accessto social services. It considered very real constraints on the poor's ability to participate in labormarkets (e.g., adequate bus services and telephones) and ability to access education and health care(e.g., although students are eligible for subsidized bus fares, private bus operators are known toliterally throw students off buses in favor of full-fare paying adults). Two issues received particularattention. First, private business investors frequently cite high crime rates as a deterrent to increasedinvestment. Homicides are the leading cause of death and disability among Jamaican males aged 15-44. The origins of much of the violence, especially in the garrison communities of Kingston, can betraced to the drug trade. Second, the impact on the urban poor of proposed and actual privatization ofmajor utilities (e.g., bus routes, water, electricity) was examined. The Government has been takingsteps to reduce crime and violence. Apart from programs that encourage self-employment and labortraining, the Government is reforming the penal system while emphasizing development of skillsamong prisoners, and is deploying its security forces to assist the police in maintaining law and order.The Government has also requested from the Bank and the IDB technical assistance in routing newminibuses to these under-served communities.

58. In addition, in order to serve the needy better, to minimize leakage, expedite processing, andto ensure efficiency in screening, the Government is issuing identification cards for welfare recipientsand rationalizing existing welfare institutions. A poverty implementation unit in the PM's office and aformulation and monitoring unit in the PIOJ have been set up to improve the effectiveness of theGovernment's programs. In addition, the poverty reduction strategy should also reduce the barriersthat trap the poor in the rural sector, without forcing them into urban settings where adequate jobs andhousing are scarce. The lack of adequate policy and programs for rural development is the most seriouslacunae in the government's strategy to reduce poverty. Most of the poor live in rural areas, but theirneeds are not adequately addressed in the sectoral programs for agriculture or infrastructure.Education and health sector programs also do not adequately address the needs of the rural poor; moreshould be done in these sectors as well.

IV. Assessment of Programs in the Social Sectors

59. Overall, the Government has adequate safety nets in place. But the delivery of socialservices is constrained by the limited administrative capacity and the need for better coordinationamong various agencies. The Government is however, innovating with programs to improve thedelivery of services and to wean away people on welfare. Box 4 notes the wide range of socialprograms on which the Government allocated about 1% of GDP in 1994 (In addition, the publiceducation and health systems constitute about 5% and 3% of GDP respectively). The social

23

JAMAICA: CO UNTRY ECONOMIC MFMORANDUM

programs include: Food Stamps, School Feeding, Social and Econornic Support Program(SESP), the National Insurance Scheme, and the more traditional welfare programs, includinglow-income housing and labor-intensive employment creation. The Human ResourcesDevelopment Program (HRDP) which was initiated in 1987 is supported by the Bank and otherexternal agencies. The SESP and the HRDP have restored budgetary allocations, re-directedinvestments towards services most likely to reach the poor, and increased cost recovery.

60. Under the food program, pregnant women and the elderly and indigent are under-served.The underlying reasons are lack of information about eligibility and procedures for applying. Inthe 1990s, the Government has been trying to wean away some of the food stamp beneficiaries byproviding grants to start income-generating projects. The process has been slow and only about10% have been taken off the rolls of the food stamp program. About 28% of children fromhouseholds below the poverty line benefited from the school feeding program. The schoolfeeding program suffers from low production of nutribuns, inadequate storage facilities in schoolsand transport bottlenecks which limit the programs' ability to reach the remote schools. TheSESP progran is primarily geared to assist youth, the poor and the aged through training,employment opportunities, financial assistance to students, and housing for the aged and the poor.

Box 4: Jamaica - Social Programs, 1993-94Beneficiaries Public Expenditures

Target Actual (J$ million)1. Food stamps program 320,000 285,900 137.0

Pregnant mothers 30,000 2,300Children under 6 years 150,000 152,300Elderly, disabled, indigent 100,000 38,400Single person households 20,000 73,800Family plan 20,000 19,100

2 Grants for income-generating projects 5,000 9.53. School feeding program 412,000 321,300 161.0

Cooked lunch (small contribution) 132,000 132,000Nutribun 280,000 189,300

4. Social and economic support program (SESP) - -- 340.05. Public assistance/poor relief - 14,500 25.06. National insurance scheme -- 76,000 337.0

Old age pensioner -- 50,000Injured on the job -- 26,000

7. Permanently dependent on welfare - 118,0008. Other welfare services such as institutional care -- -- 202.0

61. Health. In the 1990s, the Government allocated about 3% of GDP per year. The policythrust is to increase outlays to primary health care to upgrade preventive services. Rehabilitationof existing facilities is also a key priority. Apart from beneficiary cost sharing, there is a move torationalization of centers including down-grading certain hospitals to health centers, contractingout non-medical hospital services, introducing fee-paying in-patient care and an effective referralsystem from the primary to the higher levels of care. Also, drug windows at hospitals cater mostlyto the needs of the poor. About half of the poorest 20% of the population access the publichealth system. About 69% of the poorest people considered the health services to be inadequatecompared with 23% of the wealthiest group. But the referral system from the primary to the

24


secondary centers needs to be improved. While the shortage of drugs has been removed, the pricesof pharmaceuticals have risen sharply in recent years, creating additional difficulties for the poor.

62. Housing. About 3,000 houses are being built by the public sector agencies comprising theMinistry of Housing, the Urban Development Corporation, and the National Housing Trust to benefitneedy households. Increasingly the Government is moving away from direct provision of publichousing towards servicing lots and upgrading settlements. The private sector (e.g. PortmoreHousing Scheme) is now involved, despite which unmet demand exists as increasing number ofsquatter settlements are springing up on the outskirts of the Kingston, Montego Bay and OchoRios.

63. The Government resorts to geographical and population targeting of the social programs.The most needy and deprived communities and the vulnerable groups such as unemployed youth,women and children, are integrated in community development through upgrading of physicalconditions including housing, roads, water and sanitary facilities. Collaboration among residents,the private sector, voluntary services agencies, community based organizations (CBOs) and theGovernment could be further improved. It is intended that CBOs would take the lead indeveloping programs and projects in their community rather being reliant on Government oroutside agencies. Reform of the local governments would enable parishes to develop capacity toundertake labor-intensive small repairs of roads, bridges, water and sewerage systems. For thispurpose, community savings and the Government's social investment and parochial funds to beestablished in 1996, and credit through microenterprises projects are to serve as key instruments.

4. Conclusions

64. Economic developments since July 1995 indicate that the macro stabilization is not yetcomplete, and that policy slippages and structural rigidities are thwarting the Government effortsto achieve macro stability. The Government is aware that macro stability is a pre-condition forprivate sector led growth. After the recent forrmal exit of the IMF, the Government is continuingits close discussion with the IMF in designing and implementing a consistent set ofmacroeconomic policies. The Government's main objective is to enhance rapid growth as this isan essential element in poverty reduction. There are several factors limiting growth, but the keypriorities for Government are to:

* Improve economic management through consistent and stable fiscal and monetary policies soas to reduce inflation and reduce economic uncertainty. During the past five years, the moneysupply growth was high and fiscal surges, in particular the large wage increases toGovernment employees once every two years, contributed to the resurgence of high inflation.The Government needs to bring down inflation by lowering money expansion, especially byceasing BOJ advances to troubled financial firms. The Government is committed tomaintaining a stable but competitive exchange rate and slow down the accumulation ofinternational reserves by the BOJ. It is, however, aware that a stable nominal exchange ratewhen domestic inflation is higher than the international inflation would lead to an appreciationof the real exchange rate resulting in a loss in Jamaica's external competitiveness. Theappreciation of the real exchange rate would also fuel devaluation expectations and could leadto further increase in consumer imports and a widening of imbalance in the external accounts.

25

JAMAICA: COUN7'RY ECONOMIC MEMORANDUM

After domestic inflation is brought under control, the BOJ should phase out the specialdeposit scheme and gradually lower reserve requirements on the commercial banks whileraising the reserve requirements on the financial firms and building societes so as to bringdown interest rates. Continued restraint on public spending, especially on wages and salaries,would be required. Greater autonomy to the BOJ could improve the conduct of monetarypolicy and facilitate the financial sector reforms.

* Address the financial sector problems. High real interest rates are one of the factors that areshifting private resources from productive sector investment towards short-term financialinstruments with higher returns. The Government needs to facilitate the early restructuring ofthe weak financial institutions while ensuring that prudential norms in this sector are updated.Further, there is a need to strengthen the supervisory system.

* Rebalance the roles of private and public sectors through an increase in private provision ofpublic services, and as planned by the Government, speeding-up privatization of the railways,Petrojam, and the power and water companies, while at the same time improving theregulatory frameworks in the critical sectors for bringing in private investment. As alsoplanned, modernization of the public administration at the Central Government level, whilesimultaneously strengthening the local governments and the community based organizationscould support efficient delivery of public services.

* Reduce the incidence of poverty, which in itself is a result of high inflation and low growth.The wide net of social programs are holding the incidence of poverty to the 1990 level. But,in the future, sustained high growth will be required to make a significant dent on poverty andperhaps, on crime and violence.

26

Technical Annexes

27

Annex I

FINANCIAL SECTOR ISSUES

I. Structure

I. Jamaica's financial sector consists of a relatively large number of institutions.Deposit-taking institutions consist of II commercial banks, 26 merchant banks, 4 financehouses, 33 building societies, 88 credit unions, and an unknown number of industrial andprovident fund societies. By end- December 1994, the commercial banks accounted for68% of total deposits, building societies ranked second with 23% and the other financialinstitutions (merchant banks, finance houses and trust companies) held 7%, and theremaining 2% was held by credit unions.

2. Financial institutions are mostly private owned. However, the Government hassome non-voting shares in the National Commercial Bank (NCB), the second largestcommercial bank, and also in development finance institutions such as the AgriculturalCredit Bank (ACB), the National Development Bank (NDB), the Jamaica Mortgage Bank(JMB), and the National Housing Trust (NHT). The NCB and the foreign-owned NovaScotia Bank (NSB) account for 80% of the deposits of the commercial banks. Lifeinsurance companies are relatively well developed and invest mainly in governmentsecurities and mortgage loans. Building societies and credit unions also play an importantrole in the financial sector. The small Jamaica stock exchange is incorporated as a privatecompany.

3. Many of the commercial and merchant banks are part of larger conglomerates,which also include other types of financial institutions, such as insurance companies and unittrusts. Cross-ownership of different financial institutions is wide-spread. The linkages gobeyond common ownership to intra-group transactions, such as loans from banks to relatedfinancial entities and deposits of insurance companies in their associated banks. Themagnitude of such transactions is unknown at this time. Perhaps the riskiest type ofinterrelationship is the one among the financial institutions and the real sector companies ofthe same conglomerates. These financial-industrial groups often are important players inthe industrial, service, media and tourism sectors. These linkages are not in themselveswrong, and are found elsewhere (e.g., Japan, Germany and other major Europeancountries). Unfortunately, the safeguards that exist in the industrial countries to preventabuses of this type of corporate structure do not exist in Jamaica. Even the limitedsafeguards that were legislated in 1992 are not enforced in practice.

II. Recent Developments

4. In December 1994, the Blaise group of three small financial institutions failed. Thisinvolved a merchant bank and the related building society and an industrial and providentfund society. Total liabilities of the three institutions are estimated at about US$33 million,

29

FINANCIAL SECTOR ISSUES

with the asset deficit being around US$18 million.' Mismanagement was the main causeunderlying its liquidation. In July 1995, the problems of the Century National Bank group(fourth largest commercial bank) were made public. By end-June 1995, it was estimatedthat CNB was insolvent by about J$1.1 billion (US$30 million) but there are seriousquestions about the classification of certain assets and receivables and payables. The CNBis still operating with the previous management and ownership in control of the bank. TheBOJ has advanced CNB about J$4 billion (over US$100 million) at an interest rate of 33%per year (while market lending rates range between 50-60%) during the past two years toshore up the liquidity of the CNB. The Government took over the liquidation of the Blaisegroup in order to protect the depositors because there is no deposit insurance in Jamaica,nor is there a legal precedent that could determine the process of reimbursing thedepositors. The Government has recently agreed to pay the depositors 90% of theoutstanding amount. With regard to CNB, neither the Finance Ministry nor the BOJ haveyet developed an effective action plan for dealing with it and the institution is yet to be putunder "conservatorship." In November 1995, two smaller merchant banks also declaredbankruptcy.

5. The overall health of other commercial banks is worrisome. The available balancesheets of major commercial banks and discussions with the BOJ authorities indicate thatduring the year ending June 1995: (i) loans increased by over 50%; (ii) past due loans forsix months or over almost doubled during the past twelve months and represented 8.2% oftotal loans, (iii) under-reporting of nonperforming loans and capitalization of accruedinterest and questionable practices in portfolio management by some banks suggest a muchhigher stock of problem loans, BOJ estimates the overdue loans to be about 61% of capital,which is unacceptably high; (iv) provisioning for loan losses, including capitalized interest,at about 36% of past due loans which is below the international norms of 50% for loans inarrears for more than six months; (v) average capital-to-assets ratio for the system at 6.5%,which is below the 8% ratio of the international convention (Basle risk-weighted ratio); and(vi) seven banks, including CNB, were overdrawn with BOJ; BOJ appears not toconsistently obtain collateral for such overdrafts, and the repurchase transactions betweenthe BOJ and the banks are entered loosely without firm contracts. In general, the overallquality of bank management is less than satisfactory in Jamaica.

III. Roots of the Crisis

6. The roots of this crisis in Jamaica are imbedded in the bad management of thefinancial firms, the conduct of monetary policy, the structure of the financial institutions,and the inadequate regulations and supervision of the sector. The BOJ has until a fewmonths ago incurred losses and its financial position was therefore weak. BOJ's weakposition was adversely impacting upon the conduct of monetary policy. For example,reserve requirements have been kept high (while frequently being changed) during the pastten years not only to restrain the growth of money and credit but also to provide income for

I The total assets of deposit taking institutions in Jamaica at the end-1994 were in the order ofUS$4.2 billion.

30

Annex I

the BOJ to cover its weak financial position. Commercial banks are currently required tomaintain 25% of their assets in non-interest earning "cash" reserves and another 25% inGovernment securities, the liquid assets requirement (LAR). The high requirements facedby the commercial banks adversely impact upon the lending rates, which have rangedbetween 40% to 60% during the past two years. Differential reserve requirements (e.g.,17% in cash reserves for financial institutions, and 1% for building societies) haveencouraged disintermediation from commercial banks to merchant banks in the early 1990sand more recently from merchant banks to building societies. The number (increased from6 to 33) and the assets of the unregulated building societies have been growing rapidlyduring the past two years.

7. While domestic interest rates have been generally high in the 1990s, the Governmentstrategy of sterilization of capital inflows during 1993-94 (which averaged 10% of GDPduring this period) was partly responsible for further increasing the domestic interest rates(other factors include high inflation and the high cost of financial intermediation). Between1993 and 1994, foreign exchange purchases and sales increased rapidly as the interest ratedifferentials led to a surge in capital inflows. In order to mop up the excess inflows (i.e.liquidity) in the system, the authorities issued domestic debt at high interest rates. Theresult of high interest rates has been an enormous "net resource transfer" from bankborrowers to banks and from banks to private sector depositors. Had the authoritiesengaged in unsterilized purchases of foreign exchange or not purchased foreign exchange atall when the J$ started to strengthen during mid-1993 until end-1994, interest rates wouldnot have been so high and the magnitude of the problem facing the banks would not havebeen so enormous. The spreads between lending and deposit rates have widened from 5% inearly 1993 to about 25% now. From March 1993 to December 1994, the Jamaican bankdeposits rose by about 103% in nominal terms, while lending increased by only 92%.

IV. Government Response and Future Reforms

8. After the CNB problems were made public, and as devaluation expectations wereraised due to rapid depreciation of the J$, the Government in August 1995 announced a setof economic policies aimed at tightening liquidity and reducing pressure on the exchangerate. These measures included: (i) direct intervention through BOJ sales of foreignexchange to authorized foreign exchange dealers; (ii) imposition of a Special DepositScheme that requires commercial banks and some financial institutions to maintain up to20% of their liabilities with the BOJ over and above the reserve requirements; (iii)increasing the reverse repurchase rate; (iv) reduction of the public sector balances held incommercial banks; and (v) closer monitoring of the cambios. In addition, in early 1995,legislation was amended to give powers to the Bank of Jamaica (BOJ) to oversee bothbuilding as well as industrial and provident fund societies. The specific regulatoryframework for this type of institution is still to be fully developed. The BOJ's capacity tocarry out supervision of such complex ownership structures is constrained by the numberand quality of supervisory staff and the lack of appropriate legislation, particularly in dealingwith problem banks, including revocation of license, intervention and liquidation. There arecurrently three workgroups and a Senior Advisory Committee involved in strengthening

31

FINANCL4L SECTOR ISSUES

banking regulation and supervision. The first task force is overseeing the efforts towardsimproving the financial sector legal framework, the second group is instituting a depositinsurance scheme, while the third group is mandated to upgrade certain regulations,modernize supervisory information systems, and develop procedures for banking inspectionas well as BOJ staff training in this area. The Senior Advisory Committee is headed by theGovernor of BOJ and includes policy makers from BOJ, the Ministry of Finance and theOffice of the Attorney General.

9. The Government's reform effort in the financial sector in the short and longer termshould include the following actions:

* in the short term of a few months, the need is to re-establish economicstabilization to bring down inflation, eliminate BOJ losses, cease BOJ liquiditysupport to troubled banks with a view to facilitating their early restructuring,place the CNB and other failed institutions under "conservatorship" or facilitatetheir merger with relatively sound commercial banks or accelerate theirliquidation; identify roll-over of large loans for monitoring, and ensurecapitalization of 8% of assets. Such policies could restore confidence in thesystem and lower domestic interest rates;

3 at the same time, there is a need to ensure the continued functioning of thefinancial system while taking strong measures to contain losses and while takingdecisions on strengthening the management or the capital base of selected banksafter determining their financial condition;

o in the medium term of less than two years, the Government should improvefinancial sector prudential norms and standardize the asset/loan quality; and

o in the medium to longer term, the supervisory system should be strengthened,both in its structure and in its capacities, including increasing the staffingadequacy (both in quality ano number of staff) of the supervisory agencies,upgrading the information systems used as input for off-site analysis, improvingthe auditing standards for financial institutions and providing sufficient powersto the supervisors to be able to enforce the norms.

Selected Financial Indicators1989 1990 1991 1992 1993 1994 1995

Commercial Bank net credit to private sector/GDP* 23.7 23.4 19.2 15.0 16.3 17.2 20.7Net domestc assets of the financial systemnGDP* 53.6 45.3 38.1 36.1 36.1 31.6 31.7M3/GDP* 42.2 35.4 29.9 24.3 28.7 26.3 32.4Gross Internabonal ReserveslM3 5.5 7.6 11.3 26.4 23.9 38.8 50.8

Commnercial Bank Weighted Average Deposit Rate (%) 14.4 22.4 26.4 36.7 21.2 39.3 40Commercial Bank Lending Rate (%) 22.2 32.4 37.4 54.5 43.8 66.9 58Average Inflabon (% per year) 14.3 21.9 51 77.3 22.1 35 31.6Corn. Bank Real Deposit Rate(%) 0.1 0.5 -24.6 -40.6 -0.9 4.3 19Corn. Bank Real Lending Rate (%) 7.9 10.5 -13.6 -22.8 21.7 31.9 37^ Based on end of period stock, JSrnn, 1991 = FY1990/91,

32

Annex U

GROWTH ANALYSIS

This annex provides: (i) estimates of the total factor productivity; (ii) details of thesources of growth during 1980-94; (iii) estimates of output and employment in theinformal sector; and (iv) an indication of impact of crime.

I. Estimating Total Factor Productivity Growth

1. The growth of total factor productivity (TFP) for Jamaica for the period 1979-94is estimated based on the data from the Bank's Research Project on "The InternationalEconomic Environment and Productivity Growth in Industrial and Developing Countries"(RPO-676-67). The Cobb-Doublas production function is written in logarthmic form as:

(1) log Y = log A(O) + Xi time + ai log K + 2 log L

where Y is value added, K and L are the capital stock and labor employedrespectively, Xi is the TFP growth over time, cl and M are output elasticities, and A(O)represents initial conditions. Differentiating with respect to time yields:

(2) dlog Y = Xi +al dlog K + a2 dlog L

2. The constant returns to scale restriction of al + M2 = I is imposed. As an alternatemodel, we have also included human capital (H) representing average years of totaleducation in Jamaica. Estimation of equation (2) indicated that during the past fifteenyears the share of labor was 59% of the output and the share of capital was 41%.Employment growth in Jamaica was about 2.2% per year and growth in capital was about1%. As such, over 75% of the output growth has come from an increase in labor, whilethe contribution of investment was very small. Inclusion of human capital did notsignificantly increase the explanatory power of the equation. The following is theestimated equation.

(3) dlogY = -0.12 + 0.41 *dlogK+ 0.59* dlogL R-sq=0.69(-0.39) (3.81) (5.59) t-stat in parenthesis

3. The TFP growth in Jamaica is estimated at -0.65% per year for the period 1979-94. This TFP growth is very low compared to the faster growing developing countries.This result for Jamaica is consistent with the Bank research project's (mentioned above)estimate of the TFP growth rate (without human capital) of -1.07% per year for the period1960-90. A comparison between TFP growth and per capita GDP growth indicates a

33

GROWTHANALYSIS

non-linear relationship. Higher GDP growth would require positive and higher TFPgrowth rates in Jamaica.

II. Sectoral Analysis

4. The economy experienced no growth during 1980-85 followed by a strongrecovery when growth averaged about 5% per year during 1986-90. Growth averagedabout 1% per year during the first five years of the 1990s. The spurt in growth during1986-90 was primarily driven by expansion in construction and tourism and to a lesserextent by the positive contribution of all other sectors. This growth period also coincideswith lower inflation. The growth in stayover tourists appears to be crucial for enhancingthe overall growth of the economy. The increasing shares of construction and transport inthe economy, both related to tourism, indicate the importance of the services sector. Theservices sector, along with the construction sector, have been the main generators of jobsin recent years. Employment growth in general during the 1990s has been, however, verylow. Employment in manufacturing has declined since the mid-1980s. At the aggregatelevel, the level of investment has remained sluggish during the past fifteen years.

5. Overall output per worker has not significantly increased since 1980. However,there have been some productivity increases, mostly in garment production, and inagriculture and transport sectors. The increasing share of exports as a proportion of GDPfrom 48% in the early 1980s to more than 60% of GDP now has had a positiverelationship with the overall economic growth. Despite the high real interest rates duringthe 1990s, the commercial banks have increased their lending to the productive sectors, inparticular to the services sector, but this could be due to capitalization of interest androlling over of debt by commercial banks.

6. Demand Linked Growth. The structure of demand has not changed significantly inthe past decade as gross domestic expenditures exceeded GDP during most of the years.The wage increases in 1993 and in 1995 have led to increase in private consumptionduring the last three years. Private investment was sluggish since early 1980s testifying tothe persistent doubts about the business climate in Jamaica in light of the high inflation,high real interest rates and Government's commitment to reforms. Exports (gnfs) show anupward trend in the last ten years as the real effective exchange rate depreciation enhancedJamaica's competitiveness in merchandise exports and tourism. Growth in imports (gnfs)has been higher than exports because high inflation made it attractive for consumers tohold goods rather than save or invest.

7. Savings, investment and growth. Domestic savings have averaged about 15% ofGDP during the past decade and are below investment levels of 20% of GDP. Privatesavings are sensitive to the economic cycle as a result of consumption smoothening. Thedeposit interest rates and the changes in nominal exchange rate did not influence the savingsrate. Growth has been negatively correlated with Government consumption. Largeexternal debt service payments are a transfer of resources away from the domesticeconomy and therefore are a drain. Similarly, an increase in domestic borrowing by the

34

Annex 11

Government is crowding out the private sector from use of these resources. Raising publicsavings have not been very effective in raising national savings. For example, public savingshave gone up from almost nothing to 8% of GDP since 1989, whereas private savings havebeen very volatile and fluctuated between 7% and 14% during the same period. The increasein private transfers in the 1990s reflected a surge in remittances from abroad (averagingabout US$500 million per year or 5% of GDP) and an increase in the number ofJamaicans returning since 1993 has also increased investment, primarily in real estate. Thechallenge is to increase domestic savings to about 25% of GDP on a consistent basisthrough pension reform, development of attractive financial instruments, and throughelirnination of bias in interest rates towards consumer credit and residential housing(building societies charge mortgage rates of 19%). Given the nature of foreign capitalinflows, it is possible that this may result in increased domestic savings and investment.

8. A key issue is to improve the "quality" of investment. The ICOR estimates forJamaica are significantly above the developing countries' average ICOR of 4. To someextent, the ICORs in Jamaica would be higher because of the small size of the economy,the high unit cost of infrastructure, and the hurricane and security related investments.However, the ICORs in Jamaica have tended to be much higher than that of the otherCaribbean islands similarly constrained by size. Foreign direct investment has been verylow (2% of GDP) compared with the Bahamas, the Barbados, the Dominican Republicand the OECS (10% of GDP).

9. Supply Side Growth. As part of its industrial strategy the Government intends toidentify the dynamic sources of growth. The following analysis could assist theGovernment in this task. Alumina and bauxite exports, and tourism receipts account for22% and 50% of export revenues respectively. Jamaica is dependent on preferential tradearrangements with the European Union, the United States of America and the CARICOMcountries for its exports of sugar, bananas, processed foods, and garments. Exports ofmerchandise increased during the past fifteen years and trade with USA, UK and Canadaaccounted for over 60%. Trinidad has become a growing market for Jamaican exports.Exports to CARICOM has shown a decline for the fourth consecutive year. In the fiveyears up to 1994, the share of non-traditional exports increased from 19% of totalmerchandise exports in 1990 to 33% in 1994. Apparel exports registered the largestincrease with over 20% per year. Alumina, bauxite, sugar and banana exports were theother main contributors.

10. Agriculture. This sector contributes about 7% of GDP and employs almost 25%of the work force. The positive trend in agricultural growth is attributable primarily to astrong performance in sugar and bananas (induced by preferential trade arrangements withthe United Kingdom and more recently the European Union) and more recently to anincrease in domestic food production, especially of fruits, vegetables, tubers andhorticulture. Agriculture production and exports are almost fully concentrated in sugar(3% of GDP) and bananas (1% of GDP). Jamaica has an EU sugar quota of 126,000tonnes and a US quota of 18,000 tonnes. But during the past ten years cane productionhas averaged around 150,000 tonnes per year, much below the estimated level of 255,000

35

GROWTHANALYSIS

tons needed to cover export quotas. Yield in tonnes of cane per hectare for the industryhave been increasing since 1986, following the reorganization of the sugar sector. Inparticular the farmers have almost the same yields as the larger estates. Primarily becauseof favorable preferential prices the value of sugar exports increased from US$50 million in1985 to about US$100 million in 1994.

11. In contrast, the value of banana exports increased from US$30 million in 1985 toUS$75 million in 1994. Since 1985, major reforms in this sector including divestment,introduction of farm-gate pricing, and increase in acreage and yields have increasedproduction (and export) volumes from a low of 11,000 tons in 1985 to 79,000 tonnes in1994. However, these volumes were below the EU banana quota of 150,000 tonnes.

12. Coffee production increased four fold during the past ten years and nowcontributes about US$20 million per year in export earnings. Blue Mountain and lowlandcoffee production were stimulated by favorable world prices which increased by over10%, in particular for higher grade coffee. New acreage also came under coffeeproduction since Hurricane Gilbert in 1988. In addition, environmental protectionmeasures with emphasis on pest management and improved efficiency in use of fertilizersare increasing production. Similarly, citrus exports more than doubled in the 1990s.Cocoa production tripled during the 1990s as world prices increased steadily from about500 British Pounds per tonne in 1990 to about 900 British Pounds per tonne in 1994.Cocoa's foreign exchange earnings are about US$3 million per year. The export of non-traditional agriculture such as fruits (mainly papayas), tubers and horticulture (cut flowers)increased by about 10% per year.

13. Manufacturing. The manufacturing sector contributes about 20% of GDP,employs 11% of the labor force (about 40,000) and exports account for 10% of exportrevenues. Exports of manufactured products (such as garments, soaps, beer, and fruitjuice concentrates) within CARICOM and to North America benefit from preferentialarrangements. Garments benefit from USA customs regulations 806/807 (whereby duty inthe USA is payable only on value-added in Jamaica when the raw material is of USAorigin). Canada provides similar benefits under its CARIBCAN program. The productionwas interrupted by about 30 work stoppages in each year. The average employmentdeclined by about 2700 to 95100 in 1994. Jamaica ranks third, next to the DominicanRepublic and Costa Rica in terms of the value of apparel exports to the USA. During the1990s, the share of manufacturing exports to total exports has been declining. In recentyears, processed foods (including sugar exports, cocoa, coffee and citrus products),leather and leather products, beverages and tobacco (including rum exports) and chemicalsall showed an up and down trend. However, the export of apparels continued to be theleader. The increased production is from the three free zones (Kingston with 16 firms and6300 employees; Montego Bay with 21 firms and 3650 employees; and the Garmex with 9firms and 4200 workers) taking advantage of a new bilateral textile agreement signedbetween the Government of Canada and Jamaica for the period 1994 and 1995. Thisagreement allowed for unrestricted access to 18 products, except underwear. Theimplementation of NAFTA and the deferral of CBI parity creates some problems, such as

36

Annex II

Mexican textile and garment firms competing with Jamaican firms. The immediate impactof NAFTA is likely to be limited (garments and clothing exports of about US$11 millionper year) but could jeopardize the competitiveness of other manufacturing exports, such asprocessed food products, beer, rum, chemicals and leather products. The possible adverseimpact ranges from 1% to 3% of GDP.

14. Mining. Jamaica ranks among the top five countries in the world both in bauxiteand alumina production. Bauxite production buoyed by favorable prices in 1994 peakedat 11.8 million metric tons and alumina production fluctuated around 3.2 million metrictons per year. The turnaround in prices of about 29% compared to 1993 prices was dueprimarily to the Brussels agreement in 1994 which facilitated production cuts by majoraluminium producers to balance the world demand and supply by the end of 1995. Smallquantities of gypsum, lime, marble and stone are also produced. Bauxite and alumina areproduced by joint ventures (Government with 50% shares with major multinationals, suchas Alcan, Alcoa, Kaiser). These account for 22% of export earnings (about US$700million) and 75% of merchandise exports. The production of alumina, which has a highervalue-added contribution to GDP, has increased very unevenly during the 1980s with largefluctuations in year to year output growth. Recent trends have however, been morepositive following the divestment and the improvements in the mining code and thetaxation regime which is favorable to the private sector as it emphasizes income-relatedtaxes instead of royalties.

15. Tourism. Since the mid-1980s, tourism has become the most important source offoreign exchange and employment in Jamaica. The number of stayover visitors increasedby about 5% per year during 1980-94, while cruise ship passengers increased by about3.4% per year. This performance was consistently below the Caribbean regional averageand significantly below the faster growing destinations, such as the Dominican Republic,Aruba, Martinique, Mexico, and the Bahamas. The value added by all tourism activities isestimated at about 13% of the total economy, with foreign exchange earnings of aboutUS$1 billion in 1995. Direct and indirect employment was estimated to be around217,000 equivalent full-time jobs (23% of total employment) and provided for significantGovernment revenues. Jamaica has 18,500 rooms, which is less than the rooms availablein the Dominican Republic (24,400). About 17% of hotels were all inclusive, 50% inother hotels and about one-third in guest houses, cottages, apartments. Montego Bay andOcho Rios had over 30% of the rooms, while Negril had 20% and Kingston had 9%. Thehotel occupancy rates have averaged about 60% in the 1990s. The financial profile of themain private sector firms generally show a profitable industry. Earnings before interestand taxes for the whole industry averaged about 20% of the total assets with all-inclusivehotels (19%) and other hotels (about 25%). This growth has created employmentopportunities, not only in construction but in the full range of related services, includingsale of cut flowers, handicrafts, and clothing and garments.

16. During the past few years, tourism has benefited from the drop in air transportcosts and the increased number of scheduled flights, the removal of import restrictionswhich facilitated refurbishment and expansion of room capacity, and the promotional

37

GROWTHANALYSIS

efforts of public and private sectors of Jamaica. Tourism's growth is influenced by thereal effective exchange rate, the economic conditions in Europe and North America. Themore depreciated the Jamaica dollar in terms of the US dollar the cheaper it is for the stayover tourist to visit Jamaica. Maintaining a competitive exchange rate is therefore, a keypolicy requirement for enhancing tourism prospects, particularly at a time when theMexico Peso devaluation makes Mexico relatively competitive. The rapidly expandinghotel capacity in Dominican Republic, and the gradual opening up of Cuba are likely todivert tourists away from Jamaica to these destinations in the medium-term. Thestatistical relation between violence (measured by number of murders per year) and touristarrivals is not conclusive because Jamaica has always had a high violent crime rate. Butthere is no doubt that a reduction in violence through tighter law enforcement would leadto social stability and be an important factor in attracting foreign direct investment intourist resorts and related services.

17. Export services. The country shows much promise in expanding potential newexport services. The divestment of the telecommunication company has significantlyincreased the quality of services. Already in recent years, data processing and informationbased services have emerged in the Digiport and Kingston areas, albeit from a small base.The fast growth of services in world trade, the proximity to the large US market,Jamaica's good telecommunications facilities, and the relatively well educated labor forceshould provide the country with a comparative advantage in expanding this sector.

1II. Growth in the Informal Sector

18. The informal sector in Jamaica is defined as small businesses employing less than10 workers each. Available estimates indicate that this sector's employment and incomegrowth during the past fifteen years was over 5% and 2% per year respectively. Incontrast, the formal sector's employment and GDP growth during the same period wasabout 2.2% and 1.6% per year respectively. The latest available sample survey of 1994indicates that there are about 100,000 such small establishments in Jamaica, employingabout 174,000 workers or over 25% of non-agricultural labor. Previous sample surveysestimated an employment of 80,000 workers (38,000 establishments) in 1978 and morerecently about 151,000 workers in 1990. The sector is dominated by own-accountworkers (or sole proprietors) engaged in import and/or production and sale of clothes andgarments, food, furniture, plastic household items (cups, plates, buckets), toiletry,perfumes, jewelry, plastic footwear, and small electrical parts. To a lesser extent, activitiesin the transport and services (e.g. repair, domestic services) sectors are also a source ofemployment and income.

19. The adverse economic conditions during the past two decades and the reduction inpublic sector employment are cited as two underlying factors explaining the increasedactivity in the microenterprises sector. The businesses may be categorized in two ways: (i)those operated by the poor for subsistence purposes; and (ii) some establishments that arerelatively stable and financially viable family business having the potential to move up tothe small-scale end of the formal sector. Most entrepreneurs in this sector exhibit a high

38

Annex 11

level of commitment to their businesses. Women operate at the smaller end of the sectorcompared to males, and are concentrated within a narrower range of activities, such as thesale of merchandise. The expansion of this sector is constrained by credit access, the highlending rates of the domestic financial institutions, and inadequate market access partlyresulting from absence of linkages with the formal sector. In addition, the sector does nothave adequate access to improved technology, training or business management. Therelative weight of these impediments changes over time. But lack of credit is identified asthe major factor at business startup. The formal credit market serves the largermicroenterprises, which have lower risks and more collateral assets.

20. In some instances, public policies and institutions are creating undue businesscosts, such as fragmented processes and locations for registration of businesses, statutorytax obligations, and other regulations. Together, these frequently constitute barriers toestablishing and maintaining small businesses in the formal sector and perpetuate a viciouscircle of informality. The benefits of informality, such as non-payment of taxes, are verytangible to entrepreneurs in their immediate environment. However, among other things,informality inhibits firms from expanding their client base, denies them from servingcertain markets (e.g. insurance companies require firms to have formal status in order toprovide auto repairs to beneficiaries), does not allow direct import and export bybusinesses, prohibits claiming General Consumption Tax credits on used inputs, frustratesobtaining credit from the formal banking system, and may deprive benefits provided underlabor laws, such as minimum wages, leave, overtime and severance pay.

21. Since the mid- 1980s, the Government has tried to include small businessentrepreneurs, in particular the traders (also called higglers or hucksters) into the formalsector by building shopping plazas, starting a process of registration of businesses, issuingtax compliance certificates and facilitating credit access. In recent years, the Governmenthas increased its interest subsidies to this sector. Under the Government's interest rebateprogram public funds are wholesaled through the two development banks, which lend atan interest rate of 12% per year to affiliated institutions including commercial banks, creditunions and cooperatives, such as the EXIM Bank of Jamaica, the National DevelopmentBank (NDB), the Agricultural Credit Bank (ACB) and the Microenterprise Investment andDevelopment Agency (MIDA). Maximum loan size is about US$100,000 perestablishment and the Government has established a ceiling of 17% interest to be chargedto the final borrower. The Government subsidizes the spread of 5%. The program hasbeen slow because of the relatively high interest rates, low spreads that are not profitableto the financial institutions, and the cumbersome paper work required by the Governmentwhile claiming the rebate. About 30-40% of micro finance is estimated to be at risk ofdelinquency. Poor appraisal and loan monitoring by lending institutions, rather than anyexternal factors, are said to be contributing to these delinquency rates. Financing is alsotaking place through credit unions and NGOs at higher interest rates of 20-25%,frequently supported by the microenterprise programs set up by bilateral agencies, such asthe Netherlands Government, European Union, USAID, CIDA, and GTZ (Germany).However, the combined loan portfolio among the main NGOs is estimated to be small atUS$7 million for about 3,000 clients. As such, there is a substantial unmet credit demand.

39

GROWTHANALYSJS

22. Policies to Encourage Informal Sector Growth. The Government shouldconsider outlining a policy framework for development of this sector in collaboration withthe private sector. Such a policy framework should include: (i) reforms to reduce thebusiness overhead costs of Government possibly through one-stop shopping forregistration, certification and tax collection; (ii) support to small business developmentthrough provision of factory/office space and through services in planning, accounting,and packaging; and (iii) improving the existing credit delivery mechanism throughsimplifiying credit procedures, through group guarantees (as in Grameen Bank inBangladesh) or risk-pooling, by improving the skills of credit officers in the financialintermediaries, and by expanding the involvement of formal banking institutions.

IV. Impact of Crime and Violence

23. Crime did not increase significantly during 1982-1994 in Jamaica. However, thefluctuations from year to year are wide and Jamaica also has the highest per centageviolent crime in the Caribbean at 37.5-43.3%. Even given this high number, the legalsystem seems to have coped, maintaining a 56.2-66.5% clearance of reported casesthrough the period. Violent crime includes all types, but suicide seems to be low at 3-21per year. Murder is very high, at 690 in 1994 mainly in Kingston and St. Andrew. Elevenrural parishes collectively accounted for 28.1% of the total murders. Convictions for drugoffences for the period 1982-1990 was an average of 3611, but in 1991-1994 thisincreased by an average of 78.5% to 6446. It is possible that drugs have fueled thecommission of other crimes in Jamaica and qualitative research could well show that, likeTrinidad, the majority of crimes are drug related.

24. The perpetrators of crime are overwhelmingly male, under 34 years old, the largestnumber 20-24 years old, followed by those 25-29. Most were convicted for committingmurder, felonious wounding, sexual offences etc. The victims were largely unskilledlabourers and the unemployed, 90% were male and 21-25 years old. Essentially, therefore,of the same age group, status and gender as the perpetrator. Firearms were used in 63%of the murders, 56% of robberies, and 29% of rapes/carnal abuse. In 1994, about 40% ofthe murders were related to domestic violence. Jamaica's crime is also affected by thenumber of deportees, who were returned from the USA and elsewhere for possession ofdrugs and/or illegal firearms. They come back to Jamaica and continue their activity,particularly the drug trade, importation and use of firearms, and money laundering.

25. The high crime rate is adding to security-related costs on investments, but notenough data is available to allow the costs of crime in Jamaica to be fully assessed. TheGovernment's economic strategy includes an anti-crime component, with the followingprograms try to deal with crime in Jamaica: (i ) Special Anti-Crime Task Force (SACTF),which consists of personnel who concentrate on firearms recovery and arresting of gun-totting criminals. In 1994, 149 firearms, 1839 rounds of ammunition and a variety ofillegal drugs were seized. In addition 14,300 people were detained and 338 arrests made.(ii) Community Policing; (iii) Tourism Liaison under which 100 Special Constables wererecruited and trained to work in resort areas (e.g. Ocho Rios, Port Antonio, Montego Bayand Negril) to ensure that tourists are not harassed; and (iv) Operation GLOCK that was

40

Annex 11

initiated in May 1994 to counteract gangs and has been successful in neutralizing gangs.Other measures are private sector programs such as Crime Stop, Neighborhood WatchGroups, and sensitivity enhancing programs. This information, obtained from theStatistical Institute shows that not only does Jamaica have a high number of crimes but thewidest programs to combat it. It appears that crime could have been even higher but forthe actions taken by the country.

TABLE A-2: Crimes in Jamaica, 1982-1994Year Total Total Percent Total Percent Drugs Prosecutions

Reported Cleared up Cleared up Violent Violent

1982 47,803 27,585 58.5 19,867 42.2 3528 NA1983 49,462 28,569 57.7 20,825 42.1 3263 25,4001984 51,924 30,414 58.5 21,186 40.8 4451 NA1985 53,058 30,645 57.7 21,123 39.8 3382 25,9681986 49,511 28,139 56.8 19,301 38.9 3478 26,5091987 48,957 27,677 56.5 20,647 42.1 3521 27,0471988 44,345 24,930 56.2 19,456 43.8 3607 27,4861989 45,791 25,808 56.3 19,886 43.3 3593 32,3501990 50,101 29,314 58.5 20,697 41.3 3678 33,9041991 49,319 31,902 64.6 18,522 37.5 6711 36,1101992 49,352 30,095 60.9 20,173 40.8 6298 29,5581993 53,282 34,337 64.4 21,275 39.9 6915 NA1994 52,662 35,069 66.5 22,394 42.5 5859 NA

41

Annex m

LABOR MARKET ISSUES

I. Introduction

1. On March 28, 1995, a high-level Labor Committee comprising of academics, civilservants and representatives of unions and employers was appointed by the Prime Ministerto: (i) review the labor market functioning including the codes, practices and processing oflabor negotiations and contracts; (ii) review the laws, regulations and practices in regard tohealth and work safety; and (iii) recommend means by which employee stock ownershipprogram (ESOP) can be encouraged. The Committee, through its Interim Report, maderecommendations to the Government on a wide array of topics, ranging from legalizing theworkers right to strike, to dealing with contract workers, to productivity linked wages, totraining and information disclosure policies.

2. The following information is based on existing studies of the Jamaican labor market,interviews with qualified labor market observers and participants, and analyses of aggregateand sectional data. This annex provides a summary of: (i) the trends in employment andunemployment and characteristics of the unemployed; (ii) the determinants of earningsdifferentials between private and public sector workers; (iii) the labor market regulations;(iv) the wage and employment rigidities; (v) labor productivity; (vi) labor conflicts andexisting arrangements for resolution; impact of wage guidelines on negotiated wages; and(vii) the union rivalry and wage premia for unionized workers; interaction of the tradeunions within the same sector/firm.

II. Unemployment

3. The current unemployment rate is about 15%, while the job-seeking rate isestimated at 7%. This job-seeking rate is not high by international comparisons. However,the slightly upward trend observed since 1991 could be indicating a return to the highunemployment regime of the late 1970s and early 1980s. The number of people holding ajob increased by half in Jamaica over the last twenty years. A significant share of thisexpansion was related to self-employment, as well as to salaried jobs at the low end of theearnings ladder. The share of informal sector employment increased from about 15 percentof the employed in the late 1970s to almost 25 percent in the late 1980s and to 30% now.Although the exact numbers are sensitive to the method used to measure the informalsector, the change in the composition of employment has expanded, particularly increase inself-employment and informal sector jobs. Unemployment rates are high among women andthe youth; within the latter group, they increase with the level of education. The mainsource of income for the unemployed is family support in the form of remittances fromabroad, which may make the unemployed more reluctant to take low wage jobs. Most ofthe unemployed do not have access to social safety nets such as the food stamps program,which are primarily targeted at mothers with young children and at the elderly.

43

LABOR MARKETISSUES

4. Until quite recently, public sector jobs had salaries higher than their private sectorcounterparts. Moreover, in the 1970s the expansion of public sector employment was usedas a tool to reduce unemployment. But as adjustment led to government down-sizing andto significant cuts in earnings, the rationale to queue for government jobs vanished.Unemployment is also an issue from the perspective of poverty alleviation, given itsprevalence in specific groups such as female household heads.

III. Labor Regulations

5. While the Jamaican labor market has a large flexible segment, where self-employment and informal sector are prevalent, firms in the formal segment of the market donot appear to be constrained in their employment and wage decisions by stringent labormarket regulations. Minimum wage (at J$500 per week) legislation and job security do notappear to be distortionary in Jamaica. In the private sector, workers with more than twoyears of service are entitled to severance pay, at a rate of two weeks of pay per year ofseniority. After ten years of service, the rate goes up to three weeks per year of seniority.From the point of view of labor costs, this compares favorably to the one used in manyLatin American countries, where one month of salary has to be paid for each year ofservice. However, unlike other countries, Jamaica has no cap on the total amount ofseverance an employer may end up paying to a dismissed employee. Such a cap existedbefore 1986, when 26 years of service was the maximum recognized seniority. Mandatedcontributions to social security are also below the regional average. Employers andemployees jointly pay 5% of the payroll to the National Insurance Scheme, which providesold-age, widows, widowers, children and invalids' pensions, lump-sum and funeral grants,and payments for certain employment-related accidents and certain diseases. This is thesecond lowest rate among more than thirty countries in Latin America and the Caribbean.Employers and employees pay an extra 5% to the National Housing Trust, which uses thesecontributions to finance low-cost housing. And employers also contribute 3% of the payrollto the Human Employment and Resource Training fund.

IV. Wage rigidity

6. The wage setting mechanisms currently in force in Jamaica are not well suited todeal with large fluctuations in the inflation rate, like those experienced in recent years. Inunionized firms and sectors, most wage adjustments are negotiated between employers andtrade unions for a two-year period. Although the standard agreement includes a wageincrease in each of the two years, the amount of the second-year increase is not contingenton any local or macroeconomic development. Moreover, the amount of the wage increasesis much more heavily influenced by past inflation than by expected inflation over the life ofthe contract.

7. The fact that most wages in the unionized sector of the economy are set for a two-year period means there is nominal wage rigidity in the short run. In a context of short-runnominal wage rigidity, real wages decline when the inflation rate goes up, and increase whenprices stabilize. Large fluctuations in the cost of labor are detrimental to an efficient

44

Annex III

allocation of resources. Over the real wage cycle created by inflation and stabilization,there is more hiring and firing than would be warranted, had the real wage remained stable.According to qualified observers, many recent wage settlements were followed byredundancy, as employers facing higher labor costs had to cut up on staff Moreover, largereal wage fluctuations are a source of sore industrial relations. For several years, theGovernment of Jamaica tried to influence the outcome of collective bargaining by settingso-called wage guidelines. The aim of these guidelines was to make wage settlementscompatible with expected inflation, thus introducing a forward-looking component in wagenegotiations. In practice, the guidelines were used to introduce a downward pressure onwages that was strongly resisted by trade unions. Wage guidelines might have beeneffective in containing wage increases for some time, but their effectiveness was limited. Inpractice, sharp fluctuations in the inflation rate had a larger impact on real wages than theguidelines themselves. Given the recent experience in use of these guidelines, attempts atre-introducing them as an income policy tool are likely to be resisted.

8. The upward trend in real wages in the 1990s is likely to continue in the mediumterm. The importance of past inflation in determining wage adjustments can be assessed byanalyzing the outcomes of collective bargaining in recent years. These are arrangements inwhich the Ministry of Labor had to mediate between the parties, which means there is aself-selection bias in the sample. However, the direction of the bias is unclear-wageincreases set in these agreements could be higher or lower than in other agreements notreferred to the Ministry of Labor.

V. Employment Rigidity

9. The adjustment of employment to changes in aggregate demand may differ fromfirm to firm, depending on the labor market characteristics of the sectors these firms belongto. Although unionization is likely to be one of the main determinants of differences inemployment flexibility across sectors, relatively little is known about union membership inJamaica. Even aggregate figures are scattered and controversial. Unionization is estimatedto have decreased from 43% of the wage earners in 1979 to about 24% now. The trend issaid to be driven by the down-sizing of firms affected by the recovery of real wages. TheGovernment of Jamaica has always been led by persons with ties to the labor movement, buttrade unions no longer exercise decisive influence over party policy and party thinking inJamaica. The decline in the political role of unions, however, should not be mistaken with adecline in their capability to influence labor market outcomes. What may be changing is theway they exercise this power.

VI. Labor Productivity

10. Economic performance is not only affected by labor costs, but also by a set of non-market interactions between employers and employees. These interactions can be classifiedin two distinct groups: those taking place at the individual level, and those involvingcollective action. Within the first group, insubordination on the workers' side, andauthoritarian practices on the employers' side, are examples of non-market interactions

45

L4BOR AIRKET ISSUES

which are detrimental to economic performance. Within the second group, unwarrantedclashes between trade unions and management and the misrepresentation of the workers'interest by trade unions may be an additional source of inefficiency.

11. A recent survey of 255 Jamaican firrms shows that poor work habits are perceived byalmost 80 percent of managers as an important constraint to growth. The answers to thesurvey also suggest that the poor attitude is not linked to a lack of formal education amongworkers. Neither the literacy nor the numeracy of workers are among the most importantreported impediments to growth. The dismal condition of public transportation anddifficulty of getting to work, poor management, and the widening gap between mangers andworkers are some factors behind the poor work attitude.

VII. Labor Conflicts

12. One of the salient characteristics of the Jamaican labor market is the high frequencyand intensity of labor conflicts. Over many years, there has been an average of one newindustrial dispute per working day. Quite surprisingly, in formal surveys, majority of themanagers do not consider labor conflicts in their own firm as a major source of concern.However, in informal interviews recently carried out in Jamaica, all the managers agreed onthe highly disruptive nature of wild and unexpected work stoppages in the public sector ingeneral, and in essential services in particular. The number of stoppages in essential serviceshas increased significantly since 1988. Moreover, the number of workers involved instoppages and the hours of work lost due to these stoppages increased steadily. As a result,labor issues took more than one third of the time of Cabinet meetings over the last fivemonths.

13. The economic incentives to confront faced by employers and unions provide a betterstarting point for labor market reform than do cultural factors. On the workers' side, themain incentive to confront comes from the low cost of strikes. In principle, workers havethe freedom (not the right) to strike, while employers have the freedom to the workers whogo on strike. However, this kind of dismissal is very uncommon. In practice, labor conflictsare processed under a "no victimization" rule, which means that after the conflict is over,the employer takes back all of the striking employees. Interviewees were only aware ofthree instances in which employers made use of their freedom to dismiss. The prevalence oflabor conflicts is also due to the slowness of the dispute resolution mechanisms in force inJamaica. When direct negotiation between unions and management has failed, there may beconciliation by the Ministry of Labor if requested by one of the parties to the dispute. Ifconciliation also fails, the matter is referred to the Industrial Disputes Tribunal (IDT). Inspecial cases, an arbitration mechanism may be set up, with the arbitrator sanctioned by theparties to the dispute. After an IDT award has been handed down, further recourse may besought through the courts on a point of law.

14. The fairness of the awards issued by the IDT is not contested by either employers orunions, who both praise the role played by the Ministry of Labor in dealing with industrialdisputes. However, it usually takes very long for the IDT to issue an award. Limited

46

Annex HI1

resources, the quite advanced age of some of its members, and the fact that the lawyershired by management are too busy with other matters, are pointed out as the main causesfor delay. Although some suggest that the solution to this problem would be to refer alllabor issues to the courts, it is worth pointing out that the backload at the judiciary is worsethan at the IDT. The issue is to review the existing framework for conflict resolution andrecommend alternatives, if needed. The IDT needs more resources. Deadlines forconciliation and award issuing could be shorter. The Ministry of Labor should dopreventive conciliation before the end of the life of collective agreements in force. The keyissues is to device alternative schemes to avoid work stoppages.

VIII. Union Rivalry

15. The frequency and harshness of labor conflicts, the disproportionate level of wageclaims by unions, and the high level of actual wage settlements, could partly be due to unionrivalry. Within Jamaican firms, several trade unions may coexist, each of them separatelynegotiating wages on behalf of different groups of workers. Rivalry among trade unions atthe firm level is, to some extent, a reflection of rivalry among trade union confederations atthe nation-wide level. Most Jamaican trade unions are members of either the BustamanteIndustrial Trade Union (BITU) or the National Workers Union (NWU). Each of these, inturn, is affiliated with one of the two major political parties: the Jamaican Labor Party andthe People's National Party, respectively. But in recent years, the dominance of these twoconfederations has been challenged by University and Allied Workers Union (UAWU),which has become a major player in Jamaican industrial relations. The UAWU has nopolitical affiliation. Moreover, unlike the other two confederations, the UAWU has notbeen invited to join the labor market reform Committee.

16. The benefits of competition among unions are different depending on whether thiscompetition concerns the right to represent workers in wage negotiations, or the right tocarry out separate wage negotiations. From an economic perspective, competition is to bepreferred over monopoly, which at a first glance casts a shadow on the idea that unionrivalry is a source of inefficiency. Particularly, it is difficult to find any reason whycompetition over bargaining rights should be restricted. While most trade unions tend to begood at extracting rents from firms, only a few of them excel at raising productivity. Forunion leaders with a short-term horizon, it is easier indeed to confront with managementthan to cooperate with it. In the long run, however, a trade union that succeeds in raisingproductivity will yield higher payoffs to its members. Competition between unions for theright to represent workers therefore represents an indirect way of increasing efficiency.

47

Annex IV

DOMESTIC AND EXTERNAL DEBT:ISSUES AND OPTIONS

1. Introduction

1. The total stock of public debt increased during the early 1980s, peaking at about210% of GDP in 1986 and declining since then to about 150% of GDP in 1994. Throughseveral rescheduling and programs of debt relief, the stock of total external debt, includingshort term and private debt, had been reduced to about US$4 billion (about 102% ofGDP) by end-1995. External interest payments have also declined steadily from 5% ofGDP (23% of recurrent expenditures) in 1990 to about 4% of GDP in 1995. Incomparison, the domestic debt stock increased from about J$10 billion or US$330 millionin 1991 to about J$48 billion or US$1,500 million by December 1994. As a result,domestic interest payments rose steadily from about 5% of GDP in 1990 to about 8% ofGDP (30% of recurrent expenditures) in 1994. It appears that, by end December 1994,higher costs on borrowing had switched from external to domestic debt.

2. The rapid increase in Jamaica's domestic debt in recent years is attributable to (i)issue of debt to sterilize capital inflows, and (ii) paper issue to retire BOJ losses. Between1993 and 1994, foreign exchange purchases and sales increased rapidly. A key reason forthis significant rise in capital inflows was the high real interest rate differential betweenJamaica and its two major trading partners, the United States and the United Kingdom. Inorder to mop up excess inflows in the economy, the authorities issued local registeredstocks (LRS) at high interest rates to attract investors. As more currency flowed in, theauthorities increased interest rates further and complemented them with shorter maturitiesto attract investors to purchase debt issues. This policy allowed BOJ to accumulate netinternational reserves which rose from US$74 million in March 1994 to over US$400million at end December 1994. However, sterilization has imposed a severe cost on theGovernment. Estimates indicate that on the debt floated (about 5.5% of GDP) to sterilizecapital inflows, the Government will pay interest payments of at least J$1.2 billion per yearon this debt until maturity in 1998. If the government were to repay this debt at the end offour years, it would have paid total interest of J$4.8 billion or 2.7% of GDP whichrepresents a heavy cost of borrowing for foreign exchange of US$400 million.

3. The BOJ losses (which averaged about 5% of GDP during 1989 to 1992)reflected the rising interest costs of its total liabilities and the growth of its nonearningassets. Under a plan for the elimination of BOJ losses, Government securities were issuedto BOJ which contributed to the growth of the domestic debt while the failure of MOF topay interest on some of BOJ debt, as in the past, still undermines the operations of thecentral bank by weakening the BOJ's income stream (it also exaggerates the extent of thecentral government fiscal surplus). It is in this context that the recent BOJ intervention in

49

DOMESTICAND EXTERNAL DEBT: ISSUESAND OPTIONS

the form of advances to Century National Bank and a few other commercial banks(amounting to about US$200 million or 4% of GDP) is considered problematic.

4. Jamaica is at a turning point in its external debt management after having decidednot to pursue further Paris Club reschedulings or seek IMF exceptional financing. Thestock of external debt remains a heavy burden on the economy. At the end of 1994, totalexternal debt of Jamaica stood at about US$4.3 billion, a decline of 0.5 percent (or aboutUS$19 million) from the previous year continuing a trend started in 1991. The decrease inexternal debt was due to (i) negative net flows of US$186 million, (ii) debt forgivenessamounting to about US$6 million, (iii) debt conversion of US$15 million, and(iv) reduction of both principal (US$64 million) and interest arrears (US$28 million).However, currency valuation of US$71 million (due to the depreciation of the US dollar),interest capitalization from the Paris Club of about US$31 million, and increased in short-term debt helped offset this decline. At end 1994, IBRD became the largest creditor with ashare of 15% of Jamaica's total external debt as the United States reduced its exposurethrough debt forgiveness from 20% in 1990 to 13% in 1994. Both the Inter-AmericanDevelopment Bank and Japan have increased their exposure over the past four yearsbecoming the third and fourth largest creditors by providing new sources of funds.

I1. Options for Domestic Debt Management

5. In Jamaica, taxes are already high and further tax increases beyond current levelsare therefore not advisable. Higher tax compliance and improvements in taxadministration could increase revenues substantially. On the expenditure side, allocationsto non-wage and non-interest programs such as operations and maintenance have declinedto levels that are of concern and reducing them further will be counter productive. Themost feasible option in the short to medium term will be to simultaneously (i) lowerinflation while enhancing GDP growth; (ii) gradually reduce the nominal stock of totalpublic debt; (iii) end BOJ's intervention in the foreign exchange market and in the bankingsector; and (iv) initiate institutional reforms.

6. During 1988 and 1994, a 10% rise in inflation was found to generate a 17%increase in interest rates' with 33% of the increase occurring instantaneously and theremainder absorbed in the course of the quarter. If the real interest rate is reduced to 7%from the current 15% or over, and if there is a complete rollover of LRS, in the best casescenario, the interest payments can be reduced by more than 35% or 18.6% of GDPcumulatively over the next three year period. In addition, the Government should convertBOJ's holdings of variable interest bearing assets into fixed assets and turn its non-interestbearing securities into.interest bearing ones. Current projections show that over the nextthree years about J$19.2 billion of LRS will mature. If fifty percent of the fiscal surplus isused to reduce domestic public debt, it can fall by J$12 billion over three years saving thegovernment almost J$3 billion in interest rate payments. The savings in interest paymentsto the government in simultaneously pursuing both policies of lower inflation and using

X hi order to test the statistical significance of interest rates and inflation, regression analysis was done withquarterly data over the period 1988 and 1994.

50

Annex IV

50% of fiscal surplus to reduce domestic debt stock is about J$5 billion or a net savingsof J$2 billion beyond pursuing only a policy of lowering inflation. Further, higher andsustained GDP growth rates would complement interest payment and debt reductionpolicies in the medium-term as additional revenues will be generated for the treasury.Revenues accruing from higher growth could be used also to gradually retire part of thepublic debt.

7. Non-institutional holders of public debt now account for only 7% of total holdingsof government securities. The major issue will be in attracting new categories of investorsor increasing the volume of funds from non-banks. Data from some of the latest issues ofLRS suggests that investor groups such as pension funds and insurance companies areopen to longer term instruments that commercial banks shy away from. This market couldbe actively developed. Such an approach if successful would: (i) reduce the exposure ofgovernment to the commercial banks in the market for government bonds and securities;(ii) make it easier for the Government to reduce the liquidity ratios, in particular the cashreserve ratio of the commercial banks; (iii) encourage private sector savings in theeconomy; and (iv) lengthen the maturity of government securities and provide a lessburdensome interest payments profile for government debt. Lengthening the maturity ofdebt is not without costs as longer term debt carries a liquidity premium over the shortterm debt.

III. Options for External Debt Management

8. External debt management in Jamaica does not have the flexibility found in otherseverely indebted middle income countries (SIMICs) because of the structure of itsexternal debt. About 84% of its debt is owed to official creditors (including the LMF) ofwhich 37% cannot be rescheduled because it is held by multilateral institutions. As aresult, Jamaica has had to pursue an active policy of rescheduling its debt with the Parisand London Clubs (seven agreements each with Paris and London Club creditors).Starting with the 1991 rescheduling, Jamaica has obtained Houston terms rescheduling itsODA debt at concessional interest rates and its nonconcessional loans at market rates. TheHouston terms also includes a clause allowing creditors, on a voluntary basis, to enter intodebt/equity, debt for nature, debt for aid swaps. All eligible ODA debt can be convertedthrough such mechanism, but only 10% or US$10 million, whichever is higher, of non-ODA debt can be swapped.

9. However, Jamaica has found that successive Paris Club rescheduling are expensivedue to the capitalization of interest (US$177 million over the last four years), and that lessand less relief is provided as the amount of reschedulable debt service payments duediminishes as the cutoff date remains static. For this reason, the Government of Jamaicahas decided not to seek further rescheduling from its Paris Club creditors (the 1993 ParisClub rescheduling being an exit mechanism) after the end of the recent consolidationperiod (end September 1995). In June 1990, Jamaica rescheduled for the seventh timewith its London Club creditors continuing the trend of lowering interest rate (to LIBOR +13/16%) and longer maturity (to 2004). In order to reduce its commercial bank debt, thecountry established a debt conversion program enabling Jamaica to retire about US$122

51

DOMESIICAND EXTERNAL DEBT: ISSUESAND OPTIONS

million. However, due to the fiscal cost associated with such a program, the governmentof Jamaica had decided not to further use this mechanism.

10. Over the past five years, in order to alleviate the debt burden, several countrieshave forgiven debt owed by Jamaica. In March 1990, Canada announced it would forgiveabout US$94 million loans (all CIDA loans). The Netherlands (the National InvestmentBank) wrote off debt service payments falling due between 1991 and 1994 amounting toabout US$28 million. The United Kingdom also agreed to forgive principal and interestpayments due from June 1991 to June 1992 on ODA loans contracted between 1978 and1984 as well as on all consolidated loans for a total amount of US$13 million. As part ofthe Enterprise of the Americas Initiative (EAI), the United States restructured its PL480loans in 1991 and AID loans in 1993. Under the agreement, 80% of PL480 and 70% ofAID debt have been forgiven (for a total amount of US$3 10 million) with the remainingbeing rescheduled under a new EAI. The new EAI debt is not eligible for furtherrescheduling. However, interest on the EAI debt can be paid in local currency to bedeposited in an environmental fund. Jamaica, having signed an environmental frameworkagreement as required under the EAI, will deposit the equivalent of about US$21.5 millionworth in local currency in the environmental fund.

11. In order to achieve an international creditworthiness target of about 75% of GDPby the year 2000, Jamaica would need to reduce its current stock of debt by about US$1.3billion. It is doubtful whether Jamaica could obtain such a level of debt relief. This wouldrequire, for instance, Paris Club creditors to write off 100% of eligible concessional debt(or about US$393 million), 100% of nonconcessional eligible debt (US$252 million), and67% of post cutoff date (US$712 million). Countries which still hold concessional pre-cutoff debt such as the United Kingdom, the Netherlands, France, and Germany (Japandoes not forgive debt) could be candidates for further debt forgiveness. For instance, theNetherlands and the United Kingdom could continue their efforts to write off debt servicepayments when due (thus smoothing the budgetary impact).

12. As an alternative to outright debt forgiveness, bilateral countries have createdprograms converting concessional debt into environmental programs with partial debtforgiveness. Jamaica benefited from one such initiative when the country participated inthe Enterprise of the Americas Initiative. Other countries have also instituted suchprograms such as France and Canada. Jamaica could offer similar arrangements to ParisClub creditors on a bilateral basis such as 70 to 80% debt forgiveness with the remainingbeing rescheduled and interest payments being paid in local currency to be deposited in theEnvironmental Fund. Under the 'Swap" clause of the Paris Club rescheduling, aboutUS$424 million would be eligible (100% of concessional debt or US$393 million, andUS$31million of nonconcessional) for debt conversion. If such a program were to beimplemented, Jamaica would reduce its stock of debt by the amount eligible whilereducing its debt service payments by US$292 million on a present value basis.

13. Under the debt exchange option, a country buys in the secondary market, at theprevailing discount price, private debt owed by one of its creditors and swap the privatedebt acquired for the debt it owed to the creditor. This option requires the agreement of

52

Annex IV

the creditor prior to the exchange of debt. Mexico and Venezuela are countries with whichJamaica could negotiate to implement such swap. Some cash, perhaps from internationalreserves, would be required to implement such a strategy. For example, Jamaica couldbuy in the secondary market Venezuelan Brady par bonds at a discount of 50%. In orderto retire its stock of debt to Venezuela, Jamaica would need to purchase about US$151million of bonds at a cost of US$77 million. As a result of the swap, Jamaica would saveabout US$86 million (present value of debt service payment saved minus the cost ofacquiring the bonds). In the case of Mexico, Jamaica would purchase about US$14million of par bonds at an initial cost of about US$9 million. The exchange would enableJamaica to save about US$7 million. Overall, Jamaica could save up to about US$93million (less if opportunity cost of using reserves is taken into account) while reducing itsdebt service payment by US$178 million on a present value basis and lowering its debtservice ratio on a present value basis to 15 1%.

14. Another alternative available is to analyze its portfolio and repurchase its mostexpensive debt instruments. For example, the domestic debt is now the most expensive,followed by IMF debt, with a discount (PV over nominal) of 22%, followed by privatedebt with a discount of 26% (but not commercial bank debt which carries a 45%discount), multilateral debt with a discount of 39%, and bilateral debt with 40% but 45%for Paris Club debt. However a more detailed analysis should be undertaken on a loan byloan basis to determine which loan could be prepaid based on the cost of acquiring thedebt, reserve available (taking into account its opportunity cost vs. refinancing), terms ofthe loan, currency risk associated for carrying the debt, whether the debt isnonconcessional, and duration.

15. However, prepayment should not be an isolated exercise, but should be made anintegral part of liability and debt management. Greater care should be taken as to theterms and currency of new borrowing during negotiation, and managing debt portfolioshould also become an integral part of Jamaica's debt management strategy. Use ofcurrency and interest swaps, as well as forward market to lower the cost of funds, toreduce exchange and interest rate risks and to access certain segments of the capitalmarkets are techniques and skills that Jamaica should acquire. The Bank and IDB haveindicated the possibility of technical assistance for this. One public corporation (JPSC)has already started on this path concluding a five year interest swap by swapping a WorldBank loan with Citibank. The company will pay Citibank an interest based on six monthLIBOR on a notional amount equivalent to the principal owed to the World Bank. Thenet effect was to reduce interest cost in relation to the World Bank loan during that periodby approximately 1.59%.

16. New disbursements from bilateral creditors have been diminishing over the pastcouple years. The liberalization of the foreign exchange market and abolition of foreignexchange control has had a great impact on capital repatriation and 'legalization" of theblack market. As a result, the domestic dollar market has grown tremendously. Jamaicahas already tapped the domestic Eurodollar twice to lower its cost of borrowing. InSeptember 1993, the government issued a 7.5% bearer bond maturing in 1994, and lastyear with a US$25 million private placement issued in two tranches of US$12.5 million

53

DOMESTICAND EXTERNAL DEBT: ISSUESAND OPTIONS

each in 1994 and 1995. The issue was priced at LIBOR +1.125% with a bullet maturity.This demonstrates that Jamaica can float issue successfully in the domestic market if it iswell structured and priced.

17. Moreover, Jamaica has requested two rating agencies to provide an investmentgrade with the intention of getting access to the international capital market. However,access to the international market might be difficult because of the short track economicreforms, potential liquidity problem, and low demand on the part of institutional investorsdue to limitation imposed on the amount they can invest in a single issue (the face value ofthe bond would probably be small at around US$30 million, implying institutionalinvestors could only buy about US$3 million). Moreover, pricing of the bond might behigh with short maturity between 3 to five years. However, a sub-regional capital fundsuch as the one being developed in the Caribbean region might provide betteropportunities for Jamaica due to better knowledge of the country by potential investors.

18. Nevertheless, the financing gap generated by the underlying macroeconomicassumptions is assumed to be filled with a conservative debt strategy being adopted byJamaica. In the medium term, Jamaica will still have to rely on official sources to providethe largest share of its financing gap. Whenever possible, the country should seek tofinance long-term development projects (such as education and health) on concessionalterms from official sources such as IDB, and Japan, EEC and Nordic Investment Bank,which have over the past two years provided Jamaica with funds on concessional or nearconcessional terms. Jamaica should also pursue its objective of reentering theinternational capital market in order to diversify its sources of funds and its domesticdollar market on a limited basis. However, Jamaica should become active in liabilitymanagement so as to lower its cost of borrowing.

IV. Institutional Capacity

19. Several institutional changes are required. Many agencies maintain databases andcompute future debt service payments with the possibility of different assumptions asregard to exchange rates and inflation. Only one database should be maintained and belocated in BOJ (its current location). Both the Ministry of Finance and the AccountantGeneral should have access to this database on a read-only basis. This would enable theFinance Ministry to be an active participant in the total debt management. BOJ currentlydoes not monitor short-term debt (except for a few public enterprises) nor private non-guaranteed debt. BOJ should be monitoring all debt and acquire the skills to becomeactive in asset (e.g. international reserves) and liability management so as to lower the costof borrowing and hedge its portfolio so as to reduce the currency risk. To improvedomestic debt management there is a need to regularize (quarterly) the issue of long termsecurities, and broaden the holding and structure of the securities. The Bank and the IDBhave indicated the possibility of technical assistance to the Government in strengtheningasset and liability portfolio managment.

54

TABLE A1.1: JAMAICA - POPULATION TRENDS

(in thousands)

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

POPULATION (beginning of year) 2074.7 2100.8 2123.4 2143.1 2181.0 2218.6 2263.0 2296.3 2325.5 2346.4 2355.4 2357.9 2392.3 2414.9 2435.8 2460.7 2482.9

POPULATION INCREASE 26.1 22.6 19.7 38.4 37.1 44.5 33.6 28.9 20.6 9.0 2.5 34.4 22.8 20.7 24.9 22.2 26.9

Natural Increase 43.9 44.0 44.0 44.3 46.9 48.8 44.1 42.3 40.7 39.9 41.4 44.8 47.4 46.6 45.4 43.5 45.7Births 58.2 59.1 58.6 59.4 61.5 61.4 57.5 56.2 54.1 52.3 53.6 59.1 59.6 59.9 58.6 57.4 59.2Deaths -14.3 -15.1 -14.5 -15.2 -14.5 -12.6 -13.4 -13.9 -13.3 -12.4 -12.2 -14.3 -12.2 -13.3 -13.2 -13.9 -13.5

Net Migration -17.8 -21.4 -24.3 -5.9 -9.8 -4.3 -10.5 -13.4 -20.1 -30.9 -38.9 -10.4 -24.6 -25.9 -20.5 -21 3 -18.8

POPULATION (end of year) 2100.8 2123.4 2143.1 2181.0 2218.6 2263.0 2296.3 2325.5 2346.1 2355.4 2357.9 2392.3 2414.9 2435.5 2460.7 2482.9 2509.8MEAN POPULATION 2087.7 2112 1 2133.3 2162.1 2199.8 22408 22797 23109 2335.8 2350.9 23567 2375 1 2403.6 2425.2 2448.3 2471.8 2496.4

RATE OF NATURAL INCREASE 2.1 21 2.1 2.0 2.1 2.2 1.9 1.8 1.7 1.7 1.8 1.9 2.0 1 9 1.9 1 8 1.8Birth Rate 2.8 2 8 2.7 2.7 2.8 2.7 2.5 2.4 2.3 2.2 2.3 2.5 2.5 2.5 2.4 2 3 2 4Death Rate -0.7 -0.7 -0.7 -0.7 -0.7 -0.6 -06 -0.6 -0.6 -0.5 -0.5 -06 -0.5 -05 -0.5 -0.6 -05

RATEOFMIGRATION -0.9 -1.0 -1.1 -0.3 -0.4 -0.2 -0.5 -0.6 -0.9 -1.3 -1.7 -04 -1.0 -1.1 -08 -09 -0.8

RATE OF POPULATIONINCREASE 1.2 1.1 0.9 1 8 1 7 2.0 1.5 1.3 0.9 0.4 0.1 1.4 09 0.9 1.0 0.9 1.1

Source: Statistical Insfftute of Jamaica.

55

TABLE A1.2: JAMAICA MAIN LABOR FORCE INDrCATORS

On tousands unls odewue naad)

1978 1979 1980 1981 1982 1983 1984 1985 1988 1987 1988 1989 1990 1991 1992 1993 1994

TOTALPOPULATIONJ(annualaog.) 2087.7 2112.1 2133.3 2162.1 2199.8 2240.8 2279.7 2310.9 2335.8 2350.9 2356.7 2375.1 2403.6 2425.2 2448.3 2471.8 2496.4Popution14Yars &Over 1265.8 1306.1 1322.8 1357.3 1397.6 1430.6 1472.6 1495.0 1493.6 1506.0 1510.3 1511.2 1529.1 1555.5 1585.3 1690.3 1717.2% dPopulatkonunder14YeYos 39.4 38.2 38.0 37.2 36.5 36.2 35.4 35.3 36.1 35.9 35.9 36.4 36.4 35.9 36.1 3186 31.2%ofPopubbion14YearsandOver 60.6 61.8 62.0 62.8 63.5 63.8 64.6 64.7 63.9 64.1 64.1 63.6 63.6 64.1 63.9 68.4 68.8Labor Foe as % of Totl Popuaton 43.8 44.5 45.0 45.6 45.9 45.0 45.9 45.1 45.3 45.5 45.7 44.8 43.9 44.2 43.9 43.8 43.7Labor Forc as % d Popubaion

14Yers ndOver 72.3 72.0 72.6 72.6 72.3 70.5 71.0 69.7 70.9 71.0 71.3 70.3 69.1 68.9 68.7 64.1 63.5o d Labor Force Empoyed 75.7 72.4 72.8 74.1 72.4 73.7 74.5 75.0 76.3 79.0 81.1 82.0 84.6 84.6 84.3 83.7 84.6odLaborForcaUnempkyed 24.3 27.6 27.3 25.9 27.6 27.6 25.5 25.0 23.7 21.0 18.9 18.0 15.4 15.4 15.7 16.3 15.4oSLaborForceJobSeeldng .. .. .. 11.2 14.3 12.7 12.1 12.5 10.9 9.1 9.0 9.4 6.9 5.9 6.1 7.1 7.3

Memo: Bakdown is for 15 years and over for 1993-1994.Source: Staistcal nsbhfte of Jamaica.

TABLE A1.3: JAMAICA - LABOR FORCE AND EMPLOYMENT, BY INDUSTRY GROUP

(On fousands)

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994ANNUAL AVERAGESLabor Force 915.2 940.6 960.3 986.1 1009.9 1008.4 1045.8 1042.4 1059.0 1069.7 1077.4 1062.9 1056.3 1072.5 1074.9 1063.0 1090.5Employd Labor Force 692.5 681.3 698.7 730.3 731.4 743.2 778.9 781.7 808.5 845.4 874.3 871.8 893.7 907.7 905.7 906.3 923.1

Agricu,ure. Foresy & Fnhing 257.1 232.7 261.1 271.7 260.5 249.7 257.8 279.8 272.7 272.0 257.9 247.7 239.5 243.7 247.3 220.8 218.1Mining, Quarrying & Refining 62 7.7 82 7.7 8.2 7.7 7.7 6.5 5.8 6.0 6.0 6.4 6.9 5.1 5.8 7.8 6.8Msnufctuntng 76.1 72.4 73.0 78.3 82.1 90.8 97.1 98.6 110.0 131.4 136.0 133.8 135.8 99.0 101.9 97.8 95.1Cortstucton & Ingstlaion 32.1 31.8 25.0 28.0 29.8 34.6 32.7 33.6 32.6 39.6 45.7 54.9 56.6 58.2 59.1 62.1 68.3Trwnport, Communiatons & Public

Utilts 28.0 29.1 34.7 31.0 31.3 31.9 36.3 35.5 36.4 41.1 42.6 42.8 42.1 41.6 41.2 44.9 45.1Coammwc 90.1 87.9 87.6 98.0 98.7 107.7 109.4 113.7 124.2 123.7 137.2 136.2 142.5 170.3 172.1 191.1 195.5PublicAdmlin*Sion /1 104.3 106.6 104.1 100.5 100.2 100.2 100.5 81.9 77.8 74.0 76.4 73.6 77.3 76.8 76.4 91.7 87.3Otw Sevic,snotspwAled 98.7 113.3 105.0 1152 120.7 120.7 137.7 132.2 149.1 157.8 172.5 176.2 193.1 213.2 201.9 190.1 208.9

UnrmployadLaborForce 222.8 259.3 261.8 255.8 278.6 278.6 266.8 260.8 250.5 224.3 203.4 191.1 162.7 164.8 1692 176.7 167.4of which: non4eeers /2 136.3 160.9 154.7 1672 190.0 145.1 159.5 149.0 151.4 139.8 118.1 100.6 100.2 101.5 103.6 99.6 88.3

/1Dob from 1993 orwda Is for paid g vment employes.n 1990 D bfor month of Oober only.Source: Stdaitcl FInum of Jama.

56

TABLE A2.1: JAMAICA - EXPENDITURE ON GROSS DOMESTIC PRODUCT AT CURRENT PRICES(JS million)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994Consumpbon 4012.7 4687.1 5264.6 5949.3 7759.0 9603.8 10713.3 12550.7 14836.1 20394.3 25186.0 36343.0 61418.5 91494.3 114047.1Private 3046.5 3592.1 3976.6 4543.1 6217.5 7862.3 8577.2 10053.3 11822.7 17103.9 20903.8 30559.0 53726.5 77880.2 96532.4Public 966.2 1095.0 1288.0 1406.2 1541.5 1741.5 2136.1 2497.4 3013.4 3290.4 4282.2 5784.0 7692.0 13614.1 17514.7

Investment 759.2 1077.2 1224.4 1556.6 2163.9 2837.3 2574.0 3695.4 4988.3 5021.1 6011.1 8869.7 14888.5 21335.4 30872.8Gross Fixed Capital Formation 690.1 953.8 1167.8 1436.4 1980.7 2581.2 2431.8 3544.7 4865.3 4833.1 5859.0 8648.3 14688.2 20881.0 30546.9Change in Stocks 69.1 123.4 56.6 120.2 183.2 256.1 142.2 150.7 123.0 188.0 152.1 221.4 200.3 454.4 325.9

Total Expenditures 4771.9 5764.3 6489.0 7505.9 9922.9 12441.1 13287.4 16246.1 19824.4 25415.4 31197.1 45212.7 76307.0 112829.7 144919.9Resource Balance 1.2 -457.4 -621.9 -512.8 -564.5 -1225.2 612.2 394.0 -365.6 -2015.3 -679.5 -307.7 744.2 -7857.1 -4588.9ExportsdGoodsandNFS 2437.5 2504.3 2231.9 2496.3 5201.3 6523.7 7368.0 8649.2 9402.2 11188.3 16380.0 27752.7 51112.9 58866.9 84307.2Imporls of Goods and NFS 2436.2 2961.6 2853.9 3009.0 5765.8 7748.9 6755.7 8255.2 9767.8 13203.6 17059.5 28060.4 50368.7 66724.0 88896.1

GDP (Purchasers Values) /1 4773.1 5306.9 5867.1 6993.1 9358.5 11215.9 13899.6 16640.1 19458.8 23400.1 30517.6 44905.0 77051.2 104972.6 140331.0GrossNatonalProduct 4365.3 4988.1 5528.2 6421.2 8253.5 9569.1 12171.7 14529.7 18871.9 21840.7 26826.9 38745.4 68734.1 98580.2 129800.0GrossDomesticSavings 760.4 619.8 602.5 1043.8 1599.4 1612.1 3186.3 4089.4 46227 3005.8 5331.6 8562.0 15632.7 13478.3 26283.9Gross Natoonal Savings 498.3 5206 5031 6630 820.5 816.2 2069.5 2622.1 47802 2225.5 2773.9 4351.7 13016.5 14730.9 30548.6/1 The difference beween GDP at Purchasers Values and GDP at Producers Values is due to the inclusion of General Consumption Tax,

which does not form part of Producees ValuesNote: Revised accounts from 1986-94.Source: Statistical Institut of Jamaica, Bank of Jamaica and World Bank estimates.

57

TABLE A2.1: JAMAICA - EXPENDITURE ON GROSS DOMESTIC PRODUCT AT CURRENT PRICES (Continued)(percent of GDP)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994Consumpton 84.1 88.3 89.7 85.1 82.9 85.6 77.1 75.4 76.2 87.2 82.5 80.9 79.7 87.2 81.3Private 63.8 67.7 67.8 65.0 66.4 70.1 61.7 60.4 60.8 73.1 68.5 68.1 69.7 74.2 68.8Public 20.2 20.6 22.0 20.1 16.5 15.5 15.4 15.0 15.5 14.1 14.0 12.9 10.0 13.0 12.5

Invesent 15.9 20.3 20.9 22.3 23.1 25.3 18.5 22.2 25.6 21.5 19.7 19.8 19.3 20.3 22.0Total ExeIditure 100.0 108.6 110.6 107.3 106.0 110.9 95.6 97.6 101.9 108.6 102.2 100.7 99.0 107.5 103.3Resource Balance 0.0 -8.6 -10.6 -7.3 -6.0 -10.9 4.4 2.4 -1.9 -8.6 -2.2 -0.7 1.0 -7.5 -3.3ExportsofGoodsandNFS 51.1 47.2 38.0 35.7 55.6 58.2 53.0 52.0 48.3 47.8 53.7 61.8 66.3 56.1 60.1Imports of Goods and NFS 51.0 55.8 48.6 43.0 61.6 69.1 48.6 49.6 50.2 56.4 55.9 62.5 65.4 63.6 63.3

GDP(Purchasee'sValues)/1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0Gross National Product 91.5 94.0 94.2 91.8 88.2 85.3 87.6 87.3 97.0 93.3 87.9 86.3 89.2 93.9 92.5GrossDomesticSavings 15.9 11.7 10.3 14.9 17.1 14.4 22.9 24.6 23.8 12.8 17.5 19.1 20.3 12.8 18.7Gross National Savings 10.4 9.8 8.6 9.5 8.8 7.3 14.9 15.8 24.6 9.5 9.1 9.7 16.9 14.0 21.8/1 The difference between GDP at Purchaser's Values and GDP at Producees Values is due to the inclusion of General Consumption Tax,

which does not form part of Producer's Values,Note: Revised Accounts from 19861994.Source: Statstiseal Institute of Jamaica, Bank of Jamaica and World Bank estimates.

58

TABLE A2.2: JAMAICA - FIXED CAPITAL FORMATION AT CURRENT PRICES(J$ million)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

TOTAL FIXED CAPITAL FORMATION 690.1 953.8 1167.8 1436.4 1980.7 2581.2 2431.8 3544.7 4865.3 4833.1 5859.0 8648.3 14688.2 20881.0 30546.9

CONSTRUCTION 361.4 456.5 588.9 746.7 1001.1 1155.0 1233.5 1681.5 1978.4 1696.3 1088.8 2751.4 4267.5 4452.6 14051.6BuildingConstucton 333.5 423.7 555.4 690.2 941.9 1101.2 1146.2 1598.2 1704.4 1569.6 933.5 2426.2 3609.9 3667.1 13165.7Oher Construction incl.Land Improvement 27.9 32.8 33.5 56.5 59.2 53.8 87.3 83.3 274.0 126.7 155.3 325.2 657.6 785.5 837.9

TRANSPORT EQUIPMENT 79.2 131.8 203.8 200.6 186.1 530.6 261.9 409.2 847.0 908.8 1765.4 2207.8 3754.0 6648.8 4433.6Moor Cars 24.2 48.6 70.8 87.3 50.9 127.8 108.8 103.0 217.5 316.9 423.7 865.9 1477.1 2354.0 1321.8Trucksand Buses 41.6 57.9 110.0 96.1 93.8 147.2 83.1 194.2 337.5 467.6 591.0 970.5 1622.9 2941.5 2637.0O0th Transport Equipment 13.4 25.3 22.9 17.2 41.4 255.6 70.0 112.0 292.0 124.3 750.7 371.4 654.0 1353.3 474.8

MACHINERYANDEQUIPMENT 249.5 365.5 375.2 489.0 793.5 895.6 936.4 1454.0 2039.9 2078.0 2900.8 3553.4 6355.4 9466.4 12105.3Agricultural 13.8 15.6 14.5 20.4 37.8 39.6 35.3 100.4 80.9 150.0 104.0 135.6 311.3 313.2 355.9Industial 73.0 125.3 118.4 177.2 223.2 260.9 312.8 517.2 435.9 732.8 882.6 1100.8 2299.5 2686.4 4162.6Other 162.7 224.6 242.3 291.4 532.5 595.2 588.3 836.3 1523.1 1345.3 2018.2 2452.6 4055.9 6780.0 7942.8

Source: Statislical Insbtit of Jamaica and World Bank estimate.

59

TABLE A2.3: JAMWCA - GROSS DOMESTIC PRODUCT BY SECTOR OF ORIGIN AT CURRENT PRICES(4 mion)

1986 1987 1988 1989 1990 1991 1992 1993 1994

I. GOODS 6002.7 7308.3 8957.8 11075.9 14342.2 22008.4 36242.2 44823.9 61164.9Agriclture,ForestyandFishing 1048.8 1276.3 1392.6 1622.6 1973.1 3072.9 5777.4 8023.2 11912.1Mining ndQuarrying 901.8 1147.4 1727.9 2199.3 2831.3 4821A 6851.9 6356.0 9434.7Manufactures 2966.0 3479.6 3816.2 4581.6 5951.0 8549.4 14231.1 18103.5 24263.3Cornskudion and Instalation 1086.1 1405.0 2021.1 2672.4 3586.8 5564.7 9381.8 12341.2 15554.8

II. BASIC SERVICES 1878.9 2165.6 2342.8 2607.9 3450.6 4928.3 7574.3 10534.1 14139.8Electricityand Water 569.1 612.1 600.8 531.3 809.3 810.2 1836.1 2193.3 2839.2Transportaion, Comm and Storage 1309.8 1553.5 1742.0 2076.6 2641.3 4118.1 5738.2 8340.8 11300.6

Ill. OTHER SERVICES 6762.4 8099.5 9360.7 11270.8 14758.7 20379.4 34485.4 47840.9 65627.5Distibubon 2794.2 3471.1 3967.0 4783.5 6419.0 9284.7 17137.8 22706.8 30290.4Financial and Insurance services 931.0 1165.1 1484.7 1935.7 2514.5 3465.5 6188.3 6865.4 12131.2RealEstbleandBusinessServices 1091.0 1216.1 1326.8 1472.1 1794.6 2167.1 3053.5 3992.5 5537.2Producers odGovL Services 1238.2 1416.7 1667.2 1964.5 2580.6 3474.9 4809.1 9933.0 11899.5Miscellaneous 596.7 712.6 766.8 933.5 1220.8 1713.4 2869.2 3838.0 4960.0HousehokdPrv. Non-Profit Instbitions 111.3 117.9 148.2 181.5 229.2 273.8 427.5 505.2 809.2

IV.LESS IMPUTED SERVICE CHARGES 744.4 933.4 1202.5 1554.5 2033.9 2411.1 5071.3 5687.2 10946.2

GDP (Producees Values) /1 13899.6 16640.1 19458.8 23400.1 30517.6 44905.0 73230.6 97511.7 129986.0/1 The dIfference between GDP at Purchasers Values and GDP at Producees Values is due to the inclusion of General Consumption Tax,

which does not form part of Produse?s Values.Source: Stlistical lnsdt of Jamaica.

60

TABLE A2.3: JAMAICA - GROSS DOMESTIC PRODUCT 5Y SECTOR OF ORIGIN AT CURRENT PRICES (Contbnued)(share of GDP)

1986 1987 1988 1989 1990 1991 1992 1993 1994

I. GOODS 43.2 43.9 46.0 47.3 47.0 49.0 49.5 46.0 47.1Agriculture, Forestry and Fishing 7.5 7.7 7.2 6.9 6.5 6.8 7.9 8.2 9.2Mining and Quarrying 6.5 6.9 8.9 9.4 9.3 10.7 9.4 6.5 7.3Manufactures 21.3 20.9 19.6 19.6 19.5 19.0 19.4 18.6 18.7Consbuctionandlnstalaion 7.8 8.4 10.4 11.4 11.8 12.4 12.8 12.7 12.0

I. BASiCSERVICES 13.5 13.0 12.0 11.1 11.3 11.0 10.3 10.8 10.9Elekbicityand Water 4.1 3.7 3.1 2.3 2.7 1.8 2.5 2.2 2.2Transporation, Comm and Storage 9.4 9.3 9.0 8.9 8.7 9.2 7.8 8.6 8.7

III. OTHER SERVICES 48.7 48.7 48.1 48.2 48.4 45.4 47.1 49.1 50.5Disributon 20.1 20.9 20.4 20.4 21.0 20.7 23.4 23.3 23.3Financial and Insurance sewvices 6.7 7.0 7.6 8.3 8.2 7.7 8.5 7.0 9.3Real Este and Business Serices 7.8 7.3 6.8 6.3 5.9 4.8 4.2 4.1 4.3ProducersofGovatServices 8.9 8.5 8.6 8.4 8.5 7.7 6.6 10.2 9.2Miscellaneous 4.3 4.3 3.9 4.0 4.0 3.8 3.9 3.9 3.8Household Prv. Non-Proit Instituions 0.8 0.7 0.8 0.8 0.8 0.6 0.6 0.5 0.6


GDP (Producers Values) /1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

/1 The difference between GOP at Purchasers Values and GDP at Producees Values is due to the inclusion of General Consumption Tax,which does not form part of Producers Values

Source: Stabstical nstitute of Jamaica.

61

TABLE A2.4: JAMAJCA - GROSS DOMESTIC PRODUCT BY SECTOR OF ORIGIN AT CONSTANT PRICES(1986 J$ million)

1986 1987 1988 1989 1990 1991 1992 1993 1994

I. GOODS 6002.7 6422.5 6695.5 7427.6 7986.0 7804.2 7949.2 8008.9 8091.4Agriculture, Forestry and Fishing 1048.8 1102.9 1065.3 968.5 1080.2 1078.3 1219.2 1342.4 1442.7Mining and Quarrying 901.8 955.8 913.0 1238.1 1520.5 1606.7 1565.9 1571.3 1679.9Manufactures 2966.0 3123.2 3292.6 3540.5 3678.1 3401.0 3438.6 3378.3 3360.1Construction and Installabon 1086.1 1240.6 1424.6 1680.5 1707.2 1718.2 1725.5 1716.9 1608.7

II. BASIC SERVICES 1878.9 2080.1 2149.4 2277.9 2379.8 2460.2 2586.2 2761.3 2877.6Electricity and Water 569.1 615.1 617.2 685.4 732.6 745.5 778.2 809.3 814.5Transportation, Comm and Storage 1309.8 1465.0 1532.2 1592.5 1647.2 1714.7 1808.0 1952.0 2063.1

Ill. OTHER SERVICES 6762.4 7295.9 7559.3 7954.7 8359.5 8762.2 9167.0 9218.5 10239.7Distribution 2794.2 3100.9 3131.1 3237.3 3387.3 3462.1 3645.3 3791.2 3855.0Financial and Insurance services 931.0 1031.2 1205.6 1454.6 1607.6 1919.9 2072.6 1924.3 2834.8RealEsfatearndBusinessServices 1091.0 1137.0 1169.6 1192.2 1274.7 1327.5 1398.6 1434.0 1505.6ProducersofGovt.Services 1238.2 1262.3 1306.4 1281.2 1247.0 1237.2 1238.6 1234.0 1219.5Miscellaneous 596.7 649.6 627.4 675.8 721.5 701.2 709.1 746.7 735.4Household/Prv.Non-Profitlnstitutions 111.3 114.9 119.2 113.6 121.4 114.3 102.8 88.3 89.4


GDP(Prmducees Values) /1 13899.6 14981.4 15408.9 16459.5 17359.0 17486.7 17737.1 17990.6 18128.1/1 The dillerence between GDP at Purchaser's Values and GDP at Producers Values is due to the inclusion of General Consumption Tax.

which does not form part of Producer's Values.Source: Statistical Insttte of Jamaica.

62

TABLE A2.4: JAMArCA - GROSS DOMESTIC PRODUCT BY SECTOR OF ORIGIN AT CONSTANT PRICES (Contnued)(growth rates)

1986 1987 1988 1989 1990 1991 1992 1993 1994

I. GOODS . 7.0 4.3 10.9 7.5 -2.3 1.9 0.8 1.0Agriculture, Forestry and Fishing .. 5.2 -3.4 -9.1 11.5 -0.2 13.1 10.1 7.5Mining and Quanrying .. 6.0 -4.5 35.6 22.8 5.7 -2.5 0.3 6.9Manufactures .. 5.3 5.4 7.5 3.9 -7.5 1.1 -1.8 -0.5Const,uction and Installation .. 14.2 14.8 18.0 1.6 0.6 0.4 -0.5 -6.3

11. BASIC SERVICES .. 10.7 3.3 6.0 4.5 3.4 5.1 6.8 4.2Eectricity and Water .. 8.1 0.3 11.0 6.9 1.8 4.4 4.0 0.6Transporation, Comm and Storage .. 11.8 4.6 3.9 3.4 4.1 5.4 8.0 5.7

III. OTHER SERVICES .. 7.9 3.6 5.2 5.1 4.8 4.6 0.6 11.1Distribution .. 11.0 1.0 3.4 4.6 2.2 5.3 4.0 1.7Financial and lnsurmnce services .. 10.8 16.9 20.7 10.5 19.4 8.0 -7.2 47.3Real Esbte and Business Services .. 4.2 2.9 1.9 6.9 4.1 5.4 2.5 5.0ProducersofGovt.Services .. 1.9 3.5 -1.9 -2.7 -0.8 0.1 -0.4 -1.2Miscelaneous .. 8.9 -3.4 7.7 6.8 -2.8 1.1 5.3 -1.5HousehokdPwv. Non-Profit Institutions .. 3.2 3.7 -4.7 6.9 -5.8 -10.1 -14.1 1.2

IV.LESS IMPUTED SERVICE CHARGES .. 9.8 21.8 20.6 13.8 12.7 27.6 1.7 54.2

GDP (Producer's Values) /1 .. 7.8 2.9 6.8 5.5 0.7 1.4 1.4 0.8/1 The difference between GDP at Purchaser's Values and GDP at Producer's Values is due to the inclusion of General Consumption Tax,

which does not form part of Producer's Values.Source: Statistical Insttute of Jamaica.

63

TABLE A3.1: JAMAICA - BALANCE OF PAYMENTS(USS million)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

EXPORTS,G&NFS 1368.6 1406.1 1253.2 1237.0 1282.7 1174.6 1345.5 1576.3 1712.6 1941.4 2246.6 2182.5 2225.3 2359.3 2548.2Goods (FOB) 962.7 974.0 767.4 685.7 702.3 568.5 590.8 709.2 883.0 1000.4 1157.5 1150.7 1052.8 1075.4 1219.5

Non-Factor Services 405.9 432.1 485.8 551.3 580.4 606.1 754.7 867.1 829.6 941.0 1089.1 1031.8 1172.5 1283.9 1328.7

(of which tourism) 241.7 284.4 336.2 399.3 406.6 406.8 516.0 594.9 525.0 593.0 740.0 764.0 858.1 942.6 919.0IMPORTS,G&NFS 1367.9 1662.9 1602.4 1491.1 1421.9 1395.2 1233.7 1504.5 1779.2 2291.1 2339.8 2206.7 2192.9 2674.2 2686.9Goods(CIF) 1159.6 1457.4 1366.7 1267.8 1171.1 1131.9 962.1 1226.6 1437.9 1864.4 1933.9 1819.4 1767.0 2180.1 2167.4

Non-Factor Services 208.3 205.5 235.7 223.3 250.8 263.3 271.6 277.9 341.3 426.7 405.9 387.3 425.9 494.1 519.5RESOURCE BALANCE 0.7 -256.8 -349.2 -254.1 -139.2 -220.6 111.8 71.8 -66.6 -349.7 -93.2 -24.2 32.4 -314.9 -138.7NET FACTOR INCOME -229.0 -179.0 -190.3 -283.4 -272.5 -296.5 -315.5 -384.6 -106.9 -270.6 -506.2 -484.4 -362.1 -256.2 -318.3

Receipts 63.0 100.0 139.5 95.2 94.2 91.5 66.9 57.9 360.0 231.9 81.7 66.0 69.4 123.8 125.4

Payments 292.0 279.0 329.8 378.6 366.7 388.0 382.4 442.5 466.9 502.5 587.9 550.4 431.5 380.0 443.7NET PRIVATE TRANSFERS 81.8 123.3 134.5 94.7 80.4 153.2 111.6 117.2 135.6 135.2 155.4 153.3 248.2 306.4 447.2

Receipts 120.7 162.7 170.7 128.5 109.2 191.4 141.3 139.2 160.1 163.3 184.2 183.3 285.2 331.0 479.8Payments 38.9 39.4 36.2 33.8 28.8 38.2 29.7 22.0 24.5 28.1 28.8 30.0 37.0 24.6 32.6

CURRENT ACCOUNT BALANCEBefore Olicial Grants -146.5 -312.5 -405.0 -442.8 -331.3 -363.9 -92.1 -195.6 -37.9 -485.1 -444.0 -355.3 -81.5 -264.7 -9.8OffCi2laGrants 9.0 1.0 15.9 6.8 40.2 68.0 36.5 54.4 70.0 187.7 116.0 99.5 91.6 70.5 28.1

fterOfficial Grants -137.5 -311.5 -389.1 -436.0 -291.1 -295.9 -55.6 -141.2 32.1 -297.4 -328.0 -255.8 10.1 -194.2 18.3

LONG-TERM CAPITAL INFLOW 279.0 281.2 429.5 361.0 285.0 285.3 -38.4 162.9 45.0 120.9 131.1 195.0 82.0 37.5 -15.8

Direct investment 27.6 -11.5 -15.8 -18.7 -12.2 -9.0 -4.6 53.5 -12.0 57.1 137.9 133.2 142.4 77.9 116.8

Net Long-Term Borrowing (DRS) 251.4 292.7 445.3 379.7 297.2 294.3 -33.8 109.4 57.0 63.8 -6.8 61.8 -60.4 -40.4 -132.6Disbursements 352.7 464.7 560.1 506.7 396.4 455.9 230.0 351.7 322.1 308.8 284.4 454.6 360.4 225.1 160.8Amotization 101.3 172.0 114.8 127.0 99.2 161.6 263.8 242.3 265.1 245.0 291.2 392.8 420.8 265.5 293.3

OTHER CAPITAL, N.I.E. -220.6 -57.2 50.0 -186.8 -219.6 -62.0 43.2 191.3 143.0 15.3 256.5 -44.4 245.1 270.1 335.0CHANGE IN RESERVES (-increase) 79.1 87.5 -90.4 261.8 225.7 72.6 50.9 -213.0 -220.1 161.2 -59.6 105.2 -337.2 -113.4 -337.5

NetIMF 00 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other Change in reserves 79.1 87.5 -90.4 261.8 225.7 72.6 50.9 -213.0 -220.1 161.2 -59.6 105.2 -337.2 -113.4 -337.5

Source: Bank of Jamaica and Wortd Bank estimates.

64

TABLE A3.2: JAMAICA - TRADE IN SERVICES

(Millions of US$)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

TRAVEL 230.0 270.6 306.1 374.3 385.3 375.3 480.9 551.2 468.5 538.7 686.3 710.4 794.2 878.4 854.0

Receipts 241.7 284.4 336.2 399.3 406.6 406.8 516.0 594.9 525.0 593.0 740.0 764.0 858.1 942.6 919.0

Payments 11.7 13.8 30.1 25.0 21.3 31.5 35.1 43.7 56.5 54.3 53.7 53.6 63.9 64.2 65.0

FREIGHT AND INSURANCE -104.8 -154.0 -153.5 -136.5 -127.4 -119.7 -112.5 -156.1 -186.4 -244.4 -238.8 -234.4 -231.8 -294.1 -282.5

Receipts 16.5 6.7 4.3 7.1 6.7 8.0 12.2 9.5 11.2 13.6 15.5 10.0 6.0 5.9 13.4

Payments 121.3 160.7 157.8 143.6 134.1 127.7 124.7 165.6 197.6 258.0 254.3 244.4 237.8 300.0 295.9

OTHER TRANSPORTATION 1.7 4.9 -1.1 14.6 31.0 48.9 57.6 84.4 80.9 72.1 97.6 83.4 86.8 40.8 108.1

Receipts 97.0 90.9 92.2 95.0 110.8 126.0 136.1 154.5 157.4 184.8 195.0 161.2 189.0 167.3 231.4

Payments 95.3 86.0 93.3 80.4 79.8 77.1 78.5 70.1 76.5 112.7 97.4 77.8 102.2 126.5 123.3

INVESTMENT INCOME -224.0 -175.9 -183.5 -266.1 -258.8 -305.7 -314.2 -386.5 -407.4 -435.4 -517.1 -478.9 -348.2 -240.2 -284.3

Receipts 22.4 56.9 97.1 63.8 61.8 34.9 10.5 5.7 10.1 11.7 15.1 14.0 17.1 65.0 55.4

Payments 246.4 232.8 280.6 329.9 320.6 340.6 324.7 392 2 417.5 447.1 532.2 492.9 365.3 305.2 339.7

OTHER GOVERNMENT 12.0 11.4 12.1 0.7 -2.8 20.7 18.1 18.4 14.8 16.2 20.4 10.5 3.7 11.5 7.2

Receipts 25.6 25.6 27.9 20.0 21.0 45.9 46.3 42.2 39.2 47.2 51.0 42.0 43.8 49.6 45.0

Payments 13.6 14.2 15.8 19.3 23.8 25.2 28.2 23.8 24.4 31 0 30.6 31.5 40.1 38.1 37.8

OTHER PRIVATE -67.6 -70.1 -78.1 -86.0 -104.3 -100.9 -87.0 -72.4 213.4 38.5 -125.7 -175.3 -158.0 -162.8 -207.5

Receipts 65.7 67.6 67.6 61.3 67.7 76.0 100.5 118.2 446.7 322.6 154.2 106.6 127.9 177.3 189.9

Payrnents 133.3 137.7 145.7 147.3 172.0 176.9 187.5 190.6 2333 284.1 279.9 281.9 285.9 340.1 397.4

olw: NON-MERCH. INSURANCE -17.0 -14.5 -18.9 -18.0 -10.9 -11.5 -19.4 -16.5 285.7 148.6 -9.5 -16.0 -17.6 -27.5 -41.2

Receipts 15.0 17.5 14.5 11.4 11.4 10.7 10.1 10.0 310.7 173.0 15.6 10.0 8.5 9.2 25.0

Payments 32.0 32.0 33.4 29.4 22.3 22.2 29.5 26.5 25.0 24.4 25.1 26.0 26.1 36.7 66.2

OTHER -50.6 -55.6 -59.2 -68.0 -93.4 -89.4 -67.6 -55.9 -72.3 -110.1 -116.2 -159.3 -140.4 -135.3 -166.3

Receipts 50.7 50.1 53.1 49.9 56.3 65.3 90.4 108.2 136.0 149.6 138.6 96.6 119.4 168.1 164.9

Payments 101.3 105.7 112.3 117.9 149.7 154.7 158.0 164.1 208.3 259.7 254.8 255.9 259.8 303.4 331.2

TOTAL SERVICES -152.7 -113.1 -98.0 -99.0 -77.0 -81.4 42.9 39.0 183.8 -14.3 -77.3 -84.3 146.7 233.6 195.0

Receipts 468.9 532.1 625.3 646.5 674.6 697.6 821.6 925.0 1189.6 1172.9 1170.8 1097.8 1241.9 1407.7 1454.1

Payments 621.6 645.2 723.3 745.5 751.6 779.0 778.7 886.0 1005.8 1187.2 1248.1 1182.1 1095.2 1174.1 1259.1

OF WHICH: NON-FACTOR SERVICES 76.3 65.9 92.3 184.4 195.5 215.1 358.4 423.6 290.7 256.3 428.9 400.1 508.8 489.8 513.3

Receipts 405.9 432.1 485.8 551.3 580.4 606.1 754.7 867.1 829.6 941.0 1089.1 1031.8 1172.5 1283.9 1328.7

Payments 329.6 366.2 393.5 366.9 384.9 391.0 396.3 443.5 538.9 684.7 660.2 631.7 663.7 794.1 815.4

FACTOR SERVICES -229.0 -179.0 -190.3 -283.4 -272.5 -296.5 -315 5 -384.6 -106.9 -270.6 -506.2 -484.4 -362.1 -256.2 -318.3

Receipts 63.0 100.0 139.5 95.2 94.2 91.5 66.9 57.9 360.0 231.9 81.7 66.0 69.4 123.8 125.4

Payments 292.0 279.0 329.8 378.6 366.7 388.0 382.4 442.5 466.9 502.5 587.9 550.4 431.5 380.0 443.7

Source: Bank of Jamaica.

65

TABLE A3.3: JAMAICA - EXPORTS, F.OB.(USS million)

1980 1981 1982 1983 1984 1985 1988 1987 1988 1989 1990 1991 1992 1993 1994

TOTAL 962.7 974.0 767.4 685.7 702.3 568.5 590.8 709.2 883.0 1000.4 1157.5 1150.7 1052.8 1075.4 1219.5OfW: Re-Exports 22.0 9.2 21.7 12.6 14.5 33.5 23.7 16.9 21.9 35.2 34.8 93.3 21.8 17.1 36.7MERCHANDtSE EXPORTS 940.7 964.8 745.7 673.1 687.8 535.0 567.1 692.3 861.1 965.2 1122.7 1057.4 1031.0 1058.3 1182.8

MAJOR TRADITIONAL EXPORTS 800.6 811.0 567.5 4U7.9 511.0 343.6 367.0 429.6 574.3 673.0 852.6 788.4 681.9 657.1 725.5Bauxite 198.4 172.1 170.0 109.2 159.7 77.5 90.1 112.5 111.8 111.0 103.1 112.9 88.8 84.2 73.5Alumina 537.3 588.1 343.8 314.6 283.8 212.2 205.4 224.0 354.9 474.9 625.3 543.0 471.1 439.8 537.2Sugar 54.4 46.5 49.0 57.3 66.0 49.8 62.2 74.1 91.9 67.8 85.8 87.4 82.5 97.5 68.6Bananas 10.5 4.3 4.7 6.8 1.5 4.2 9.2 19.1 15.7 19.3 38.4 45.1 39.6 35.6 46.1

OTHER TRADITIONAL EXPORTS 25.5 32.0 33.8 33.2 35.5 30.3 30.8 30.1 34.2 33.2 48.2 40.9 50.0 52.8 48.5Catus 2.4 5.8 6.7 3.9 6.6 1.6 2.6 2.7 4.6 2.5 9.0 4.5 8.1 5.7 3.4Cocoa 4.4 5.0 4.3 5.2 4.0 4.5 5.3 2.6 1.0 0.2 6.4 4.8 2.5 1.6 3.1Coffee 5.3 5.6 7.5 8.4 8.7 7.5 6.7 8.4 9.2 9.5 9.5 12.1 16.2 19.1 16.3Pimento 3.8 4.4 4.6 7.3 6.6 6.7 5.4 5.0 5.1 4.6 5.7 3.5 4.5 3.8 3.7Rum 9.6 11.1 10.7 7.9 8.8 8.9 10.1 10.7 13.7 16.1 17.2 15.4 18.0 21.6 21.0Gypsum 0.5 0.9 1.1 0.6 0.7 0.6 0.3 0.4 0.6 0.7 1.1 1.0

NON-TRADITIONAL 114.6 121.8 144.4 152.0 141.3 161.1 169.4 232.6 252.6 259.0 221.9 228.1 299.2 348.4 408.8o.w.: Clothing 6.5 7.2 17.4 12.8 32.7 36.0 52.5 102.6 105.9 111.1 83.0 86.2 152.5 199.9 248.4o.w.:primarilyfood&plants 108.1 114.6 127.0 139.2 108.6 125.1 116.8 130.0 146.7 147.9 138.9 141.9 146.7 148.5 160.4

Source: Bank o(Jamaica.

66

TABLE A3 4: JAMAICA - EXPORTS, VALUE, VOLUME AND PRICE

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

BAUXITEValue (USS Million) 198.4 1721 170.0 109.2 159.7 77.5 90.1 112.5 111 8 111.0 103.1 112.9 88.8 84.2 73.5Volume (Million MT) 6.1 5.4 4.1 3.1 4.6 2.3 2.9 3.7 3.5 4.2 3.9 4.3 4.1 3.9 3.6Unif Value (US$/MT) 32.8 32 0 41.7 35.0 35.0 33.3 30.7 30.4 31 9 26.4 26.4 26.3 21.5 21.5 20.4

ALUMINAValue (US$SMillion) 537.3 588.1 343.8 314.6 283.8 212.2 205.4 224.0 354.9 474.9 625.3 543.0 471.1 439.8 537.2Volume (MilionMT) 2.4 2.6 1.8 1.9 1.7 1.6 1.6 1.6 1.6 2.1 2.9 3.0 2.9 2.9 3.3Unff Value (USS/MT) 227.7 230.6 196.5 165.6 165.0 131.0 130.0 140.0 221.8 226.1 215.6 181.0 161.8 151.1 163.3

SUGARValue (US$ Million) 54.4 46.5 49.0 57.3 66.0 49.8 62.2 74.1 91.9 67.8 85.8 87.4 82.5 97.5 68.6Volume (Thousand MT) 131.8 121.3 138.3 136.7 157.0 152.0 143.3 135.7 152.7 132.0 146.4 152.3 139.3 149.7 126.1Unf Value (USS/MT) 412.7 383.3 354.3 419.2 420.6 327.6 434.3 545.9 601.8 513.6 586.1 573.9 592.5 651.3 544.3

BANANAValue (USS Million) 10.5 4.3 4.7 6.8 1.5 4.2 9.2 19.1 15.7 19.3 38.4 45.1 39.6 35.6 46.1Volume (Thousand MT) 33.1 18.1 21.2 23.0 11.0 13.0 20.3 33.3 27.4 46.9 58.0 73.5 70.9 74.2 75.2Unft Value (US$SMT) 317.2 237.6 221.7 295.7 137.2 320.5 452.2 572.7 573.0 411.5 662.1 613.6 558.0 480.4 613.7

OTHER EXPORTSValue (USS Pillion) 162.1 163.0 199.9 197.8 191.3 224.9 223.8 279.6 308.7 327.4 304.9 362.3 370.9 418.3 494.0

TOTAL EXPORTSValue (US$Million) 962.7 974.0 767.4 685.7 702.3 568.5 590.8 709.2 883.0 1000.4 1157.5 1150.7 1052.8 1075.4 1219.5


67

TABLE A3.5: JAMA1 - IORTS BY END-USE(USS millon)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

CONSUMER GOODS 131.2 190.1 230.9 206.9 163.7 158.2 198.9 234.7 286.9 390.5 353.1 251.9 293.3 476.9 451.8Food 72.3 101.9 119.4 110.4 98.9 82.1 97.7 94.7 124.5 160.0 131.3 90.9 107.2 145.3 125.8Non-Durabbs 31.8 42.9 47.6 42.7 42.9 40.9 66.6 97.0 105.2 142.2 143.8 82.8 105.7 138.1 144.7Durables 27.1 45.3 63.9 53.8 21.9 35.2 34.7 43.0 57.2 88.3 78.0 78.2 80.4 193.5 181.3

FUELS 446.5 488.8 406.8 397.3 349.0 367.8 195.4 235.1 192.1 273.2 400.7 325.3 315.5 343.3 328.5

OTHER RAW MATERIALS 394.6 496.7 416.1 388.8 383.2 335.1 329.7 417.6 512.2 643.8 585.9 853.5 873.3 979.4 1035.3

CAPITAL GOODS 197.7 295.2 325.7 294.2 287.3 282.5 243.5 346.9 458.2 565.3 602.7 397.9 293.3 389.6 361.0Construction Mhterials 47.0 66.7 71.5 72.3 67.4 56.1 56.3 79.8 138.1 161.6 104.3 92.9 71.7 96.9 92.7Transport Equipmrent 34.6 63.7 71.7 57.3 43.8 55.2 39.1 61.0 117.6 102.2 164.4 161.7 80.0 134.3 83.9OtherCapttalGoods 116.1 164.8 182.5 164.6 176.1 171.2 148.1 206.1 202.5 301.5 334.0 143.3 141.6 159.4 184.4

BOP ADJUSTMENT -10.4 -13.4 -12.8 -19.4 -12.0 -11.7 -5.4 -7.7 -11.5 -8.4 -8.5 -9.2 -8.4 -9.1 -9.2

MERCHANDISE IU>ORTS 1159.6 1457.4 1366.7 1267.8 1171.1 1131.9 962.1 1226.6 1437.9 1864.4 1933.9 1819.4 1767.0 2180.1 2167.4

Source: Bank of Jawaca.

68

TABLE A3.6: JAMACA - DIRECTION OF TRADE

USS mibon)

1980 1981 1962 1983 1964 1965 1966 1987 1988 1989 1990 1991 1992 1993 1964

EXPORTS:Unied Stat. 358.4 385.6 257.5 229.9 360.4 189.1 200.2 262.0 317.3 259.8 339.1 342.0 377.4 419.0 439.7

United Kingdom 186.0 179.8 140.8 143.6 98.3 95.2 111.8 124.3 162.3 154.9 174.0 186.1 180.2 147.9 164.4

CARICOM Counbies 57.0 68.5 78.4 84.8 52.9 40.6 42.3 45.6 592 67.5 71.0 62.8 60.0 59.9 58.1

Canada 37.5 89.9 93.9 86.1 103.6 93.0 95.4 97.0 135.4 135.5 129.2 119.3 119.8 107.3 147.7

No.wY 104.4 78.4 61.1 60.2 25.2 13.3 17.0 21.5 8.7 45.4 131.1 87.7 113.7 97.2 102.0

Latin Amenra 15.1 41.4 35.7 18.1 14.7 3.1 2.9 6.8 4.5 15.8 19.9 19.7 8.9 12.2 35.8

EECCountie 9.0 9.3 21.0 12.2 11.1 42.5 41.0 85.3 89.5 145.1 166.8 173.4 65.6 126.0 122.1

Ohr 195.3 121.0 79.0 50.8 36.3 91.6 80.2 66.7 106.1 176.4 126.4 159.7 127.3 106.0 149.8

TOTALJAMAICA 962.7 974.0 767.4 685.7 702.3 568.5 590.8 709.2 883.0 1000.4 1157.5 1150.7 1052.8 1075.4 1219.5

PAPORTS:Uniled State 369.8 534.3 487.7 506.5 541.7 481.5 487.5 588.0 696.0 913.8 948.8 934.3 832.7 1093.1 1145.1

Uniled Kngdom 78.9 94.1 107.7 79.8 63.1 59.7 65.8 84.7 99.3 115.4 102.6 102.0 84.3 94.7 96.2

CARICOM Countins 85.1 111.4 91.3 60.3 37.9 43.0 68.3 59.0 56.1 90.8 87.7 67.6 65.9 115.4 141.2

Canada 70.2 77.1 60.6 54.3 64.6 41.6 51.4 69.2 105.5 106.2 120.9 76.0 69.7 89.1 82.9

Lain America 199.7 202.3 228.4 216.5 148.2 211.9 136.5 146.3 150.4 195.2 280.5 180.5 212.0 205.0 186.1

EECCountries 54.5 74.3 74.2 56.1 55.5 53.9 50.6 68.0 120.9 114.8 95.7 144.1 164.5 190.9 197.1

Onher 301.4 364.0 316.9 294.3 260.0 240.2 102.0 211.3 209.7 328.2 297.7 314.9 337.9 391.8 318.7

TOTAL JAMAICA 1159.6 1457.4 1366.7 1267.8 1171.1 1131.9 962.1 1226.6 1437.9 1864.4 1933.9 1819.4 1767.0 2180.1 2167.4

Source: Bank d Jamaica.

69

TABLE A&T JAMAICA - CARICOM EXPORTS AND IMPORTS

(USS nitl)

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994CARICOM TOTAL CARICOM TOTAL CARICOM TOTAL CARICOM TOTAL CARICOM TOTAL CARICOM TOTAL CARICOM TOTAL CARICOM TOTAL CARICOM TOTAL CARICOM TOTAL

TOTAL EXPORTS 40.6 567.9 42.3 590.8 45.6 709.2 59.2 883.5 67.5 996.5 71.0 1157.5 63.1 1150.7 60.0 1053.5 59.5 1044.5 58.0 1223.9Food 65 111.2 8.1 130.2 8.8 151.2 10.7 171.6 115 144.5 127 192.8 155 204.7 15.1 210.3 153 227.6 131 218.9Bewagpswd Tokcc 4.7 28.4 4.7 29.3 5.1 33.6 5.9 36.8 5.0 355 48 36.9 4.6 32.9 4.3 35.3 4.2 40.7 3.5 41.7CuLenudetsr 04 294.6 0.4 301.1 04 343.4 0.5 472.8 06 593.5 17 736.5 05 662.2 0.8 566.7 3.1 531.5 0.6 618.9I4 rIFa 2.6 27.9 33 18.0 27 141 6.7 188 7.5 163 87 165 40 11.6 4.1 10.1 34 7.1 2.2 59

ChOugyc I119 178 119 18.8 131 21.3 145 20.7 163 245 175 24.6 144 22.6 14.5 25.6 13.6 24.9 13.6 25.5MmAsct.d oOs 130 545 12.5 73.9 135 129.6 18.1 142.8 23.6 1501 21.9 1198 20.2 125.3 17.5 185.0 17.5 197.2 22.5 2832MadwryardTrwmopa1EL 1.4 335 1.5 194 1.7 157 28 19.6 32 32.1 37 304 39 90.9 3.7 20.3 24 139 24 29.9O9w Prodrt 00 0.0 00 0.1 02 0.3 0.0 0.0 00 00 0.0 00 0.0 03 0.0 0.0 0.0 16 0.0 00

TOTALIMPORTS 430 1143.6 321 969.1 59.0 1209.0 561 1449.4 885 18694 877 1942.3 67.6 18286 673 16928 1154 21892 141.2 21714Food 3.2 1672 6.8 1662 12.8 1818 12.6 224.1 21.3 290.8 22.3 2316 120 217.8 228 202.9 198 259.7 21.5 2419BswgesnwdltaTc 02 76 09 9.8 22 111 61 15.3 12.2 22.9 103 204 51 150 21 110 56 167 14.0 263crudenal 03 30.6 01 308 0.3 382 0.5 48.5 0.8 471 07 459 0.8 52.9 04 59.3 05 63.2 07 63.9Mm" Fuds 26.2 3693 73 1991 19.1 209.6 0.5 195.4 6.0 274.3 3.9 4037 33 3275 0.8 2910 339 3439 49.1 329.0A*nW& Veg9 OlsawdFat 1 2 174 1.8 10.6 28 15.5 2.3 15.8 4.1 15.9 44 179 4.2 14.2 16 111 29 11.6 5 1 18.2Ohuntcal 38 1044 40 107.7 62 119.2 10.6 164.8 15.3 219.9 177 2258 148 2274 154 2204 173 2051 172 214.8MwodactL.dGodS 70 219.3 8.1 252.8 10.7 362.6 15.2 452.5 23.4 569.7 24.0 4742 23.0 478.9 201 498.5 30.7 671.3 294 703.2MudwlryuodTrmrpt EqJip. 0.5 2165 22 1748 36 248.8 6.9 311.3 5.4 396.0 4.4 4880 44 475.1 4.1 3690 4.7 5644 4.3 526.8O9e.Pro&rt 05 111 09 173 11 222 14 217 0.0 328 0.0 348 00 19.8 0.0 29.6 00 534 00 47.4

Saie.e a" of *uiita.

70

TABLE A3.8: JAMAICA - NET INTERNATIONAL RESERVES

(US$ million)

As of March 31 st1982 1983 1984 1985 1988 1987 1988 1989 1990 1991 1992 1993 1994 1995

TOTAL (NET) -442 8 -547.1 -866.2 -516 5 -535.2 -552.6 -407.1 -305.1 -397 3 -307.8 -244.8 -41.3 91.2 434.2

Assets 149.7 106.8 67.0 232.3 245.1 216.4 252.2 236.9 187.3 220.2 182.6 313.8 447.4 796.9

Liabilities 592.5 653 9 933.2 748 8 780 3 769.0 659.3 542.0 584.6 527.8 427 4 355.1 356.2 362.7

BANK OF JAMAICA (NET) -465.7 -566.2 -867.1 -557.1 -578.5 -605.9 -468.4 -366.0 -472 1 -355.9 -262.9 -66.4 66.8 412.8

Gross Reserves 126.8 87.7 66.1 191.7 201.8 163.1 190.9 176.0 112.5 171.9 164.5 288.7 423.0 775.5

Holdings of SDRs 0.4 0.1 0.1 3.2 8.0 11.5

Other Assets 126.8 87.7 66.1 191.7 201.8 163.1 190.5 178.0 112.4 171.8 164.5 285.5 415.0 764.0

LIABILITIES 592.5 653.9 933.2 748.8 780.3 769.0 659.3 542.0 584.6 527.8 427.4 355.1 356.2 362.7

IMF 464.1 597.8 626.1 618.2 667.7 683.2 617.9 453.4 360.3 36880 381.0 362.1

Trinidad and Tobago 55.0 .. .

Foreign Bank of Venezuela 2.5 .. . .. . .. *

Bank of Ecuador 5.0 . . . . . . . . .

Bank of China 1.3 1.3 1.3 .. 0.1 . . . . .

Norway Consultarncy Fund 0.7 0.9 0.8 0.7 0.7 0.4 0.4 0.4 0.4 0.4 0.4 0.4

Ubya 50.0 50.0 50.0 42.0 42.0 36.0 28.0 20.0 12.0 4.0 1.0

CARlCOM Clearing Faclity 10.9 2.4 15.3 4.6 0.0 .. 4.0 13.3 35.2 48.9 21.9

Arrearm. no.1.i. . 154.3 72.2 33.8 43.0 - 55.0 176.1 .

National Commercial Bank . .. 1.2 . . . . . . .

WeACO.. . 25.0 . . . . . . .

Marubeni . . 5.0 9.1 15.0 6.4 9.0 1.0 . . . .-

Austen Blades . .. 6.0.. . , ............-

Bank of America .. .5 1.5 1.0 0.0 . . . . .

CGS Miami . . 1.0 1.0 1.0 . . . . .

Security Pacfic.. . 1.5 . . . . . . .

VENELUM . .. 44.0 . . . . . . .

EDF .. . . . . 7.0 7.0 5.0

OTHER PUBLIC SECTOR 23.0 18.9 0.9 40.6 43.3 53.3 57.6 57.3 70.3 42.9 12.4 19.3 17.2 15.3

Consoidated Fund Gen. Acct. 0.3 0.6 -3.9 -4.5 2.0 0.3 .. 0.5 0.5 .. 0.6 0.4

Sinkidng Funds 9.4 9.9 0.7 5.4 .. . .. . ...

Deposiftiin NowYork 1.9 1.6 1.3 3.4 4.3 2.0 4.9 0.4 0.9 0.4 0.1 0.4

Banana Industry Fund 0.5 0.8 0.6 0.3 1.3 0.6 0.7 0.7 0.6 0.3 0.2 0.8

Capital Developmernt Fund 0.4 0.2 0.2 0.2 0.7 0.7 0.2 0.6 1.0 0.2 0.3 0.3 0.2 0.2

Sugar Industry Authority Fund 0.1 . . . . . . . . .

Export Development Fund 10.4 5.5 2.0 35.8 35.0 49.7 51.8 55.1 67.3 42.0 11.2 17.4

MEMORANDUM ITEM:Change in NIR. Bank of Jamaica.

Not of Valuation AdjustmntM/1 .. 122.0 306.0 -265.7 -61.9 -55.4 -189.7 -71.6 111.9 -110.3 -42.4 -170.4 -137.0 -394.0

/1 The concep for change in NIR as mfonitored under Fund program.NOTE: Assets a Gross Reserves + Other Public SectorSource: Bank of Jamaica and IMF.

71

TABLE A3.9: JAMAICA - EXCHANGE RATES(Period Averages)

Nominal RealJamaica Dollars Effective Effectiveper U.S. dollar Exchange Rate ExchangeOfficial market Index /1 Rate Index

1974 0.909 204.4 102.41975 0.909 214.5 112.01976 0.909 198.8 111.81977 0.909 183.6 111.81978 1.413 126.1 96.01979 1.765 99.9 89.91980 1.781 100.0 100.01981 1.781 107.0 106.51982 1.781 113.7 110.51983 2.018 104.0 104.41984 4.055 61.5 73.11985 5.554 45.5 63.91986 5.476 44.4 68.61987 5.487 43.8 67.81988 5.490 44.3 68.51989 5.763 46.3 73.51990 7.291 38.6 65.51991 12.716 26.3 59.01992 22.969 13.2 52.3

January 21.038 13.3 43.8Febuary 23.351 13.1 46.2March 27.267 12.1 44.5April 24.616 11.2 43.0May 22.990 12.7 50.0June 22.302 13.3 52.7July 22.168 13.3 53.7August 22.173 13.3 54.3September 22.181 13.5 55.6October 22.175 13.8 56.6November 22.177 14.2 57.7December 22.185 14.3 57.9

1993 24.951 13.6 58.3January 22.184 14.5 59.0Febuary 22.186 14.7 59.7March 22.185 14.7 60.5April 22.185 14.6 59.8May 22.185 14.8 60.7June 23.616 14.7 61.6July 24.576 13.7 58.7August 25.839 13.1 57.9September 26.886 12.6 57.3October 27.839 12.3 57.1November 29.475 11.8 55.4December 31.250 11.2 53.4

72

TABLE A3.9: JAMAICA - EXCHANGE RATES (Continued)(Period Averages)

Nominal RealJamaica Dollars Effective Effectiveper U.S. dollar Exchange Rate ExchangeOfficial market Index /1 Rate Index

1994 33.086January 32.339 10.9 53.3Febuary 32.673 10.9 54.3March 33.083 10.8 54.7April 33.162 10.9 55.7May 33.171 10.9 56.7June 33.289 10.9 57.9July 33.296 10.8 58.5August 33.203 10.8 59.8September 33.212 10.7 59.5October 33.199 10.7 60.0November 33.203 10.7 60.3December 33.205

1995 35.376January 33.135Febuary 33.085March 33.255April 33.455May 33.665June 33.735July 34.120August 35.440September 36.790October 38.660November 39.555December 39.620

/1 1980=100; increase in index represents appreciation of the Jamaica dollar.Sources: Bank of Jamaica and IMF.

73

TABLE A4.1: JAMAICA - EXTERNAL DEBT(USS million)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

DISBURSEMENTSPublic a Publicly Guar. LT 327.7 464.7 525.1 471.7 386.4 445.9 222.8 347.7 322.1 308.8 284.4 454.6 354.5 218.9 105.8

1.Of1icialCrediton 306.7 375.9 455.3 361.6 313.0 353.2 140.5 263.0 251.5 234.1 245.8 440.7 298.3 178.1 83.3a. Multilteral 92.7 90.4 159.6 97.9 75.9 126.3 70.0 138.1 93.7 113.3 102.1 133.6 121.6 151.4 67.0

of which IDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0of which IBRD 55.3 42.7 120.6 59.8 49.4 75.2 23.0 64.2 54.8 51.8 35.3 42.8 27.0 77.4 22.0

b. Bilateral 214.0 285.5 295.7 263.7 237.1 226.9 70.5 124.9 157.8 120.8 143.7 307.1 176.7 26.7 16.32.PrivateCreditors 21.0 88.8 69.8 110.1 73.4 92.7 82.3 84.8 70.6 74.6 38.6 13.9 56.2 40.8 22.5

a. Bonds 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.5b. Commercial Banks 3.7 64.3 53.4 0.6 21.1 11.2 0.0 0.0 0.0 0.0 0.0 6.4 0.3 40.0 10.0c.OtherPrrvate 17.3 24.5 16.4 109.5 52.3 81.5 82.3 84.8 70.6 74.6 38.6 7.5 56.0 0.8 0.0

Private Non-Guaranteed LT 25.0 0.0 35.0 35.0 10.0 10.0 7.2 4.0 0.0 0.0 0.0 0.0 5.8 6.2 55.0Total LT Disbursements 352.7 464.7 560.1 506.7 396.4 455.9 230.0 351.7 322.1 308.8 284.4 454.6 360.4 225.1 160.8IMFPurchases 0.0 240.1 182.4 119.9 103.1 51.8 31.2 125.6 58.7 81.8 55.8 119.1 58.8 50.8 49.2Net Short-Term CapitalTotal Disbursements 352.7 704.8 742.5 626.6 499.5 507.7 261.2 477.3 380.8 390.5 340.2 573.6 419.2 275.9 210.0

REPAYMENTS 11Public&PubliclyGuar. LT 91.3 132.0 104.8 117.0 84.2 147.8 254.3 232.3 258.0 236.1 282.9 387.0 415.0 259.7 288.1

1. Official Creditors 36.4 39.9 54.8 57.5 52.5 99.6 159.9 151.5 165.8 159.0 206.7 316.0 347.3 217.3 222.3a. Multibtral 10.2 10.9 14.9 18.2 25.9 27.8 40.6 62.3 74.9 82.1 101.8 130.2 157.0 123.5 122.9

of wtiich IDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0df which IBRO 5.6 7.1 10.6 13.3 18.4 18.3 30.0 41.6 52.6 53.8 61.8 62.0 78.0 73.5 75.8

b. Bilteral 26.2 29.0 39.9 39.3 26.6 71.8 119.3 89.2 90.9 76.9 104.9 185.8 190.3 93.8 99.42. PrNvate Credats 54.9 92.1 50.0 59.5 31.7 48.2 94.4 80.9 92.2 77.0 76.2 70.9 67.7 42.4 65.9

a. Bonds 8.6 1.2 7.4 0.0 4.2 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0b. Commercial Banks 15.6 59.9 25.9 48.8 0.5 5.0 10.0 10.7 10.9 10.1 1.1 1.2 10.0 10.6 10.1c. Olther Private 30.7 31.0 16.7 10.7 27.0 43.2 84.3 70.2 81.3 66.9 75.1 69.8 57.7 31.7 55.7

Private Non-Guranteed LT 10.0 40.0 10.0 10.0 15.0 13.8 9.5 10.0 7.1 8.9 8.3 5.8 5.8 5.8 5.2Adjust-Principal Not Paid 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 46.0 94.0 95.0 3.2 247.0 316.2 192.2Adjust.-Arrears Red/Prepay(-) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0TotalLTRepayrnentsDDUE 101.3 172.0 114.8 127.0 99.2 161.6 263.8 242.3 311.1 339.0 386.2 396.0 667.8 581.7 485.6Total LT Repayrnents PAID 101.3 172.0 114.8 127.0 99.2 161.6 263.8 242.3 265.1 245.0 291.2 392.8 420.8 265.5 293.3IMFRepurchases 19.0 58.6 51.3 44.4 59.7 62.3 121.2 225.4 219.3 167.7 111.5 87.7 78.5 72.4 87.3Total LT Repay DUE, incl. IMF 120.3 230.6 166.1 171.4 158.9 223.9 385.0 467.7 530.4 506.7 497.7 483.7 746.3 654.1 572.8Total LT Repay PAID, incl.IMF 120.3 230.6 166.1 171.4 158.9 223.9 385.0 467.7 484.4 412.7 402.7 480.5 499.3 337.9 380.6

/1 Creditor breakdown expressed on cash basis (amount paid).

Source: World Bank Debt Repording System, October 1995.

74

TABLE A4.1: JAMAICA - EXTERNAL DEBT (Continued)(USS million)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

NET FLOWSPublic&PubliclyGuar.LT 236.4 3327 420.3 354.7 302.2 298.1 -31.5 115.4 64.1 72.7 15 67.6 -60.4 -40.8 -182.4

1.OfficialCreditors 270.3 336.0 400.5 304.1 260.5 253.6 -19.4 111.5 85.7 75.1 39.1 124.6 -49.0 -39.2 -139.0

a. Multilateral 82.5 79.5 144.7 79.7 50.0 98.5 29.4 75.8 18.8 31.2 0.3 3.4 -35.4 27.9 -55.9

of which IDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0ofwhich IBRD 49.7 35.6 110.0 46.5 31.0 56.9 -7.0 22.6 2.2 -2.0 -26.5 -19.2 -51.0 4.0 -53.8

b. Bilateral 187.8 256.5 255.8 224.4 210.5 155.1 -48.8 35.7 66.9 43.9 38.8 121.2 -13.6 -67.1 -83.1

2. PrivateCreditors -33.9 -3.3 19.8 50.6 41.7 44.5 -12.1 3.9 -21.5 -2.4 -37.6 -57.0 -11.5 -1.6 -43.4

a. Bonds -8.6 -1.2 -7.4 0.0 -4.2 0.0 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.5

b. Commercial Banks -11.9 4.4 27.5 -48.2 20.6 6.2 -10.0 -10.7 -10.9 -10.1 -1.1 5.2 -9.8 29.4 -0.1c. Other Private -13.4 -6.5 -0.3 98.8 25.3 38.3 -2.0 14.6 -10.6 7.7 -36.5 -62.2 -1.7 -30.9 -55.7

Private Non-Guaranteed LT 15.0 -40.0 25.0 25.0 -5.0 -3.8 -2.3 -6.0 -7.1 -8.9 -8.3 -5.8 0.0 0.4 49.8

Total LT Disbursements 251.4 292.7 445.3 379.7 297.2 294.3 -33.8 109.4 57.0 63.8 -6.8 61.8 -60.4 -40.4 -132.6IMF -19.0 181.5 131.1 75.5 43.4 -10.5 -90.0 -99.8 -160.6 -85.9 -55.7 31.4 -19.6 -21.6 -38.0Net Shoft-Term Capital .. ..

NET FLOWS - PAID 232.4 474.2 576.4 455.2 340.6 283.8 -123.8 9.6 -103.5 -22.2 -62.5 93.1 -80.1 -62.0 -170.6

NET FLOWS- DUE 232.4 474.2 576.4 455.2 340.6 283.8 -123.8 9.6 -57.5 71.8 32.5 96.3 166.9 254.2 21.7

INTEREST /1Public&PubliclyGuar.LT 114.2 104.4 136.7 152.0 188.3 206.4 220.2 200.3 187.6 169.7 215.5 189.2 165.2 164.9 180.8

1.lOfficidalCditos 45.0 57.1 67.8 75.2 96.5 118.0 147.5 140.9 141.9 121.1 164.8 158.9 144.6 150.6 145.8a. Multiateral 16.2 18.0 24.3 32.9 41.7 45.9 63.8 82.7 84.9 79.2 86.2 91.9 92.5 84.0 84.7

of which IDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0of which IBRD 12.7 13.8 18.3 25.9 31.3 33.5 48.0 56.2 61.4 55.2 58.4 58.5 58.7 49.2 48.5

b. Biatenal 28.8 39.1 43.5 42.3 54.8 72.1 83.7 58.2 57.0 41.9 78.6 67.0 52.1 66.6 61.1

2. Privabt Creditors 69.2 47.3 68.9 76.8 91.8 88.4 72.7 59.4 45.7 48.6 50.7 30.3 20.6 14.3 35.0

a. Bonds 1.8 1.1 0.9 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

b. Commercial Banks 54.5 39.4 61.5 72.9 74.9 68.3 51.0 47.8 31.5 34.0 20.4 19.8 13.3 10.5 13.4c. Other Prvate 12.9 6.8 6.5 3.5 16.9 20.1 21.7 11.6 14.2 14.6 30.3 10.5 7.3 3.8 21.6

Private Non-Guaranteed LT 6.8 5.3 3.6 5.3 6.0 4.7 4.2 4.5 3.8 3.2 2.5 2.7 2.2 2.2 2.5Adjust.-Interest Not Paid 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 35.0 66.0 15.0 36.0 146.0 157.7 106.8

Adjust.-Arrears Reduction (-) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total LTlnterest DUE 121.0 109.7 140.3 157.3 194.3 211.1 224.4 204.8 226.4 238.9 233.0 227.9 313.4 324.8 290.2Total LT Interest PAID 121.0 109.7 140.3 157.3 194.3 211.1 224.4 204.8 191.4 172.9 218.0 191.9 167.4 167.1 183.4

IMF Service Charges 23.0 27.5 43.8 51.3 61.1 55.0 52.6 62.4 41.5 37.1 33.9 31.4 29.2 24.2 17.3

InterestonSTDebt 14.0 14.0 11.0 17.0 27.0 21.6 14.0 14.0 17.0 20.0 24.0 16.9 15.5 12.4 13.8Total lnterest DUE 158.0 151.2 195.1 225.6 282.4 287.7 291.0 281.2 284.9 296.0 290.9 276.2 358.1 361.4 321.3TotallnterestPAJD 158.0 151.2 195.1 225.6 282.4 287.7 291.0 281.2 249.9 230.0 275.9 240.2 212.1 203.7 214.5

1/ Creditor breakdown expressed on cash basis (amount paid).

Source: World Bank Debt Reporting System, October 1995.75

TABLE A4.1: JAMAICA - EXTERNAL DEBT (Confinued)(USS milion)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

DEBT OUTSTANDING & DISB. (DOD) /2Pubilc& Publicly Guar. LT 1421.2 1713.1 2115.3 2470.5 2647.1 3158.3 3295.9 3793.8 3775.1 3802.3 3972.0 3758.7 3567.4 3459.8 3439.6

1. OlMiClCreditoDS 911.0 1217.0 1606.3 1913.1 2060.8 2518.5 2654.1 3100.9 3114.3 3165.8 3414.5 3278.7 3156.1 3055.0 3093.8a. Muwltileral 285.0 363.0 507.0 582.2 556.1 750.0 905.9 1158.5 1092.7 1101.6 1175.8 1192.1 1117A 1152.5 1182.8

of which IDA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0ofdwhichlBRD 176.4 211.9 322.0 368.4 326.2 467.9 572.5 734.9 671.2 649.7 671.9 664.1 594.0 607.4 594.8

b. Bilatel 626.0 854.0 1099.3 1330.9 1504.7 1768.5 1748.2 1942.4 2021.6 2064.2 2238.7 2086.6 2038.7 1902.5 1911.0

2. Prvafte Credions 510.2 496.1 509.0 557.4 586.3 639.8 641.8 692.9 660.8 636.5 557.5 480.0 411.3 404.8 345.8a. Bonds 18.7 14.1 5.2 4.6 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.5b. Comnmercial Banks 384.0 389.0 416.6 368.3 390.9 395.6 387.1 377.6 357.6 322.5 297.6 286.5 253.7 280.9 265.3c.OhewrPrists 107.5 93.0 87.2 184.5 195.3 244.1 254.7 315.3 303.2 314.0 259.9 193.5 157.5 123.9 68.0

Private Non-Guaranteed LT 75.0 25.0 50.0 75.0 70.0 66.2 63.9 58.0 50.9 42.0 33.6 27.8 27.8 28.2 78.0TtdbLT DOD 1496.2 1738.1 2165.3 2545.5 2717.1 3224.5 3359.8 3851.8 3826.0 3844.3 4005.6 3786.5 35952 3488.0 3517.6UseoflMFCredit 309.3 469.7 582.9 627.2 628.7 693.2 678.2 678.5 482.8 383.4 356.7 391.4 357.1 335.4 317.7Short-Term 98.0 93.6 103.3 286.5 251.3 189.6 188.5 237.2 295.4 391.2 345.8 281.2 310.3 288.5 482.7Total Extnal Debt 1903.5 2301.4 2851.5 3459.2 3597.1 4107.3 4226.5 4767.4 4804.1 4818.9 4708.2 4459.2 4262.5 4111.9 4318.0

n2 Stodck of debt expressed on cash basis. Principal arrears included; interest arears not included.

Source: World Bank DetA Roporting System, October 1995.

76

TABLE A4.2: JAMAICA - SUMMARY OF EXTERNAL DEBT(USS million)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

MEDIUM AND LONG TERM DEBT /1 1805.5 2207.8 2748.2 3172.7 3345.8 3917.7 4038.0 4530.3 4308.8 4227.7 4362.3 4177.9 3952.2 3823.4 3835.3

Multiltral 594.3 832.7 1089.9 1209.4 1164.8 1443.2 1584.1 1837.0 1575.5 1485.0 1532.5 1583.5 1474.5 1487.9 1500.6

IBRD 176.4 211.9 322.0 368.4 326.2 467.9 572.5 734.9 671.2 649.7 671.9 664.1 594.0 607.4 594.8IMF 309.3 469.7 582.9 627.2 628.7 693.2 678.2 678.5 482.8 383.4 356.7 391.4 357.1 335.4 317.7

Bilateral 626.0 854.0 1099.3 1330.9 1504.7 1768.5 1748.2 1942.4 2021.6 2064.2 2238.7 2086.6 2038.7 1902.5 1911.0

Commefcial Banks 384.0 389.0 416.6 368.3 390.9 395.6 387.1 377.6 357.6 322.5 297.6 286.5 253.7 280.9 265.3

Ohrs 201.2 132.1 142.4 264.1 265.4 310.4 318.6 373.3 354.1 356.0 293.5 221.3 185.3 152.1 158.5

DEBT SERVICE (M&LT) /1 264.3 367.8 350.2 380.0 414.3 490.0 662.0 734.9 798.3 782.7 764.7 743.0 1088.9 1003.1 880.3Ihtere (due) 144.0 137.2 184.1 208.6 255.4 266.1 277.0 267.2 267.9 276.0 266.9 259.3 342.6 349.0 307.5Amortbm6on (due) 120.3 230.6 166.1 171.4 158.9 223.9 385.0 467.7 530.4 506.7 497.7 483.7 746.3 654.1 572.8

MEMORANDUM

DEBT/GDP /1 67.4 74.1 83.4 91.6 145.0 194.0 159.1 149.4 121.6 104.1 104.2 118.3 117.8 90.9 90.4DEBT SERVICEIEXPORTS /1 /2 17.0 22.0 22.4 26.0 27.9 33.6 42.6 41.4 35.8 33.5 30.4 30.6 42.2 35.6 27.9INTEREST/EXPORTS /1 /2 9.3 8.2 11.8 14.3 17.2 18.3 17.8 15.1 12.0 11.8 10.6 10.7 13.3 12.4 9.8

/1 Medium & Long Term incduding EWE./2 Eaxwb of goods, service and prhve fwrs.

Source: Tobb 4.1 of Ststicel AppenDx

77

TABLE A.: JAMAICA - SUMMARY OPERATIONS OF THE CONSOLIDATED GENERAL GOVERNMENT /1

(millions of JS)

1981/82 1982/83 196384 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94

REVENUE 1799.6 1841.0 2016.8 2932.4 3441.2 4716.2 5797.9 6349.9 8037.0 10444.7 15919.0 25065.0 36463.8

TaxRevenue 1157.6 1396.1 1532.1 2022.6 2716.9 3758.2 4323.6 4979.1 6363.7 7920.2 11479.4 19051.2 28947.5

Bauxite Levy 415.3 188.1 198.4 521.7 244.3 458.7 334.8 390.1 367.6 606.5 1245.8 1622.9 1725.5

Other 226.7 256.8 286.3 388.1 480.0 499.3 1139.5 980.7 1305.7 1918.0 3193.8 4390.9 5790.8

EXPENDITURE 2474.4 2600.0 3052.2 3414.1 4028.6 4872.6 6060.8 7556.3 8435.7 9865.8 14376.8 22123.6 32133.9

Current 1688.0 1830.9 2396.0 2776.1 3214.8 3671.3 4178.5 5403.9 6407.4 7801.8 11147.3 16949.1 26384.4

Capital and net lending /2 786.4 769.1 656.2 638.0 813.8 1201.3 1862.3 2152.4 2028.3 2064.0 3229.5 5174.5 5749.5

CURRENTACCOUNT BALANCE 111.6 10.1 -379.2 156.3 226.4 1044.9 1619A 94.0 1629.6 2642.9 4771.7 8115.9 10079.4

OVERALL BALANCE -674.8 -759.0 -1035.4 -481.7 -587.4 -156.4 -262.9 -1206.4 -398.7 578.9 1542.2 2941.4 4329.9

FINANCING 674.8 759.0 1035.4 481.7 587.4 156.4 262.9 1206.4 398.7 -578.9 -1542.2 -2941.4 -4329.9

Grants .. .. .. .. 25.0 123.7 130.0 440.0 322.8 356.6 714.3 943.2 490.9

NetEFdemalFinanicng 503.6 418.3 410.3 1116.0 636.7 -111.1 387.0 693.1 382.6 382.0 1430.0 -562.3 799.0

Net Domestic Financing 171.2 340.7 625.1 -634.3 -74.3 118.8 -582.1 -118.7 -954.0 -1956.6 4386.5 -3322.3 -5619.8

Banking system 180.7 549.7 774.3 -776.2 -180.1 -30.5 -1294.6 -631.5 -772.5 -1009.3 -3060.6 -571.7 -3366.7

Other -9.5 -209.0 -149.2 141.9 105.8 149.3 712.5 512.8 -181.5 -947.3 -1325.9 -2750.6 -2253.1

(percent of GDP)

REVENUE 33.6 30.0 26.6 29.8 27.5 32.6 35.6 34.2 32.4 31.4 31.8 32.9 35.5

Tax Revenue 21.6 22.7 20.2 20.5 21.7 26.0 26.5 26.8 25.7 23.8 22.9 25.0 28.2

Bauxite Levy 7.8 3.1 2.6 5.3 2.0 3.2 2.1 2.1 1.5 1.8 2.5 2.1 1.7

Other 4.2 4.2 3.8 3.9 3.8 3.5 7.0 5.3 5.3 5.8 6.4 5.8 5.6

EXPENDITURE 46.2 42.3 40.3 34.6 32.2 33.7 37.2 40.7 34.1 29.7 28.7 29.0 31.3

Current 31.6 29.8 31.6 28.2 25.7 25.4 25.6 29.1 25.9 23.5 22.2 22.2 25.7

Capitalandnetlending /2 14.7 12.5 8.7 6.5 6.5 8.3 11.5 11.6 8.2 6.2 6.4 6.8 5.6

CURRENT ACCOUNT BALANCE 2.1 0.2 -5.0 1.6 1.8 7.2 9.9 5.1 6.6 7.9 9.5 10.6 9.8

OVERALL BALANCE -12.6 -12.4 -13.7 -4.9 -4.7 -1.1 -1.6 4.5 -1.6 1.7 3.1 3.9 4.2

FINANCING 12.6 12.4 13.7 4.9 4.7 1.1 1.6 6.5 1.6 -1.7 -3.1 -3.9 -4.2

Grants 0.0 0.0 0.0 0.0 0.2 0.9 0.8 2.4 1.3 1.1 1.4 1.2 0.5

Net Extemal Finanicng 9.4 6.8 5.4 11.3 5.1 -0.8 2.4 3.7 1.5 1.1 2.9 -0.7 0.8

Net Domestic Financing 3.2 5.5 8.3 4.4 -0.6 0.8 -3.6 -0.6 -3.9 -5.9 -8.8 -4.4 -5.5Banking system 3.4 8.9 10.2 -7.9 -1.4 -0.2 -7.9 -3.4 -3.1 -3.0 -6.1 -0.7 -3.3

Other -0.2 -3.4 -2.0 1.4 0.8 1.0 4.4 2.8 -0.7 -2.8 -2.6 -3.6 -2.2

/1 Includes the Central Government, the National Investment Fund, the National Housing Trust and HEART. /2 Including Divestment Proceeds.Source: Ministry of Finance and IMF staff estimates.

78

TABLE AS.2: JAMArCA - CENTRAL GOVERNMENT OPERATIONS

(J$ million)

1981182 1982/83 1983/84 1984/85 1985/86 1986187 1987/88 1988/89 1989/90 1990/91 1991/92 1992V93 1993/94 1994/95 1995/96

CURRENT REVENUE 1502.7 1649.5 1790.9 2677.9 3143.0 4361.0 4861.6 5592 7 7121.2 9092.3 13505.8 21886.3 32217.1 42858.1 55481.4

Tax Revenue 1157.6 1396.1 1532.1 2022.6 2716.9 37582 4323.6 49791 6365.5 7920.2 11478.0 19051.3 289475 38403.5 50340.2

Non-Tax revenue 45.1 55.2 64.8 174.2 145.6 139.3 203.2 223.5 388.1 565.6 782.0 1212.1 1544 1 2080.4 2570.9

Bauxite levy 300.0 198.2 194.0 481.1 280.5 463.5 334.8 390.1 367.6 606.5 1245.8 1622.9 1725.5 2374.2 2570.3

CURRENT EXPENDITURE 1715.3 1861.4 2394 0 2817.9 3253.0 3755.3 4189.3 5136.0 6137.0 7470.0 10638.9 16321.7 25369.3 34392.8 46707.9

CURRENTACCOUNT BALANCE -212.6 -211.9 -603.1 -140.0 -110.0 605.7 6723 456.7 9842 1622.3 2866.9 5564.6 6U47.8 8465.3 8773.5

CAPITAL REVENUE 6.4 0.0 3.8 8.0 7.7 25.0 495.9 248.4 501.2 687.9 1199.6 726.2 905.9 977.0 1029.6

CAPITAL EXPENDITURE 642.9 656.6 508.1 517.4 681.0 964.6 1319.6 1719.6 1532 6 1371 8 2379 4 4059.8 4627.4 5876.2 9379.1

OVERALL BALANCE -849.1 -88.5 -1107.4 -649.4 -783.3 -333.9 -151.4 -1014.5 -47.2 938.4 1687.1 2231.0 3126.3 3566.1 424.0

FINANCING (NET) 849.1 888.5 1107.4 649.4 783.3 333.9 151.4 1014 5 47.2 -938 4 -16871 -2231.0 -3126.3 -3566.1 -424.0

Exlernal (Net) 503.7 419.1 499.5 1117.2 636.7 -111.1 387.0 692.7 383.3 382.0 1430.0 -562.3 799.0 -2079.5 -1483.2

Grants - - - 25.0 123.7 130.0 154.1 440.0 322.8 356.6 714.3 943.2 490.9 1343.1 979.2

Dometic (Nei) 345.4 449.4 607.9 -492.8 22.9 315.0 -389.7 -1182 -658.9 -1677.0 -3831.4 -2611.9 -4416.2 -2829.7 80.0

79

TABLE AS2: JAICA - CENTRAL GOVERNMNT OPERATIONS (Conknu'd(peced oGOP)

1981/82 1986233 19638Y4 1984/85 1965/86 1986/87 1987)8 19689 1989t90 1990/91 1991/92 19293 1993S4 1994S95 1995t96

CURRENT REVENUE 28.1 26.9 23.6 27.2 25.2 30.2 29.8 30.1 26.7 27.3 27.0 28.7 31.4 33.0 35.8Tax Renue 21.6 22.7 20.2 20.5 21.7 26.0 26.5 26.8 25.7 23.8 22.9 25.0 28.2 29.6 32.5Non-Tax rvenue 0.8 0.9 0.9 1.8 1.2 1.0 12 1.2 1.6 1.7 1.6 1.6 1.5 1.6 1.7BaSoI ey 5.6 3.2 2.6 4.9 22 3.2 2.1 2.1 1.5 1.8 2.5 2.1 1.7 1.8 1.7

CURRENT EXPENDITURE 32.1 30.3 31.6 28.6 26.0 26.0 25.7 27.7 24.8 22.5 21.2 21.4 24.7 26.5 30.1CURRENT ACCOUNT BALANCE -4.0 -3.4 4.0 -1.4 -0.9 4.2 4.1 2.5 4.0 4.9 5.7 7.3 6.7 6.5 5.7

CAPITAL REVENUE 0.1 0.0 0.1 0.1 0.1 0.2 3.0 1.3 2.0 2.1 2.4 1.0 0.9 0.8 0.7CAPITAL EXPENDITURE 12.0 10.7 6.7 5.2 5.4 6.7 8.1 9.3 6.2 4.1 4.7 5.3 4.5 4.5 6.1

OVERALL BALANCE -15.9 -14.1 -14.6 4.6 4.3 -2.3 -0.9 -5.5 -0.2 2.8 3.4 2.9 3.0 2.7 0.3

FINANCING (NET) 15.9 14.1 14.6 6.6 6.3 2.3 0.9 5.5 0.2 -2.8 -3.4 -2.9 -3.0 -2.7 -0.3Exdlnul (Nd) 9.4 6.8 6.6 11.3 5.1 -0.8 2.4 3.7 1.5 1.1 2.9 -0.7 0.8 -1.6 -1.0Grnt - - 0.3 1.0 0.9 0.9 2.4 1.3 1.1 1.4 1.2 0.5 1.0 0.6Domasbc (Ndt) 6.5 7.3 8.0 4.0 02 2.2 -2.4 -0.6 -2.7 -5.0 -7.6 -3.4 -4.3 -22 0.1

Souceo: Esttrby d Finance and 1 da eslmates.

80

TABLE AS.3: JAMAICA - CENTRAL GOVERNMENT REVENUE(is mOilion)

1981/82 1982/83 1983t84 1984/85 1985/86 1986187 1987/88 19S8/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 199lo9

TOTAL REVENUE 1509.1 1649.5 1794.7 2685.9 3150.7 4386.0 5357.5 5841.1 7622.4 9780.2 14705.4 22612.5 33123.0 43835.1 56511.0

CURRENT REVENUE 1502.7 1649.5 1790.9 2677.9 3143.0 4361.0 4861.6 5592.7 7121.2 9092.3 13505.8 21886.3 32217.1 42858.1 55481.4

TaxRevenue 1157.6 1396.1 1532.1 2022.6 2716.9 3758.2 4323.6 4979.1 6365.5 7920.2 11478.0 19051.3 28947.5 38403.5 50340.2

Taxes on income and profits 535.6 663.9 737.6 908.4 1161.0 1549.0 1722.1 2138.2 2663.0 3705.7 4845.3 7885.3 10896.4 15376.6 19145.6

Taxes on property 27.8 32.8 29.1 24.4 24.2 33.6 63.5 59.0 70.5 67.1 69.2 87.7 256.6 446.6 525.0

Taxes on production andconsumption 451.3 521.7 564.5 703.0 878.4 1367.9 1524.9 1590.0 2098.0 2486.4 3888.3 6396.3 9547.6 12323.2 15488.7

Taxes on intemationaltradeandtransactions 142.9 177.7 200.9 386.8 653.3 807.7 1013.1 1191.9 1534.0 1661.0 2675.2 4682.0 8246.9 10257.1 15180.9

Bauxite Levy 300.0 198.2 194.0 481.1 280.5 463.5 334.8 390.1 367.6 606.5 1245.8 1622.9 1725.5 2374.2 2570.3

Non-Tax Current Revenue 45.1 55.2 64.8 174.2 145.6 139.3 203.2 223.5 388.1 565.6 782.0 1212.1 1544.1 2080.4 2570.9

CAPITAL REVENUE 6.4 0.0 3.8 8.0 7.7 25.0 495.9 248.4 501.2 687.9 1199.6 726.2 905.9 977.0 1029.6

Divestment Proceeds 0.0 0.0 0.0 0.0 0.0 25.0 328.0 96.0 323.7 319.5 350.0 0.0 0.0 0.0 n.a.

Other 6.4 0.0 3.8 8.0 7.7 0.0 167.9 152.4 177.5 368.4 849.6 726.2 905.9 977.0 n.a.

Source: lhnistry of Finance and MF staff estimates.

81

TABLE A5.3: JAMAICA - CENTRAL GOVERNMENT REVENUE (Continued)

(percent of GDP)

1981/82 1982/83 1983/84 1984185 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995196

TOTAL REVENUE 28.2 26.9 23.7 27.3 25.2 30.3 32.9 31.5 30.8 29.4 29.3 29.7 32.2 33.8 36.5

CURRENT REVENUE 28.1 26.9 23.6 27.2 25.2 30.2 29.8 30.1 28.7 27.3 27.0 28.7 31.4 33.0 35.8Tax Revenue 21.6 22.7 20.2 20.5 21.7 26.0 26.5 26.8 25.7 23.8 22.9 25.0 28.2 29.6 32.5

Taxerson incomeand profits 10.0 10.8 9.7 9.2 9.3 10.7 10.6 11.5 10.8 11.1 9.7 10.3 10.6 11.9 12.4

Taxes on property 0.5 0.5 0.4 0.2 0.2 0.2 0.4 0.3 0.3 0.2 0.1 0.1 0.2 0.3 0.3

Taxes on production andconsumption 8.4 8.5 7.5 7.1 7.0 9.5 9.4 8.6 8.5 7.5 7.8 8.4 9.3 9.5 10.0

Taxes on intemational

trade and transactions 2.7 2.9 2.7 3.9 5.2 5.6 6.2 6.4 6.2 5.0 5.3 6.1 8.0 7.9 9.8

Bauxite Levy 5.6 3.2 2.6 4.9 2.2 3.2 2.1 2.1 1.5 1.8 2.5 2.1 1.7 1.8 1.7

Non-Tax Current Revenue 0.8 0.9 0.9 1.8 1.2 1.0 1.2 1.2 1.6 1.7 1.6 1.6 1.5 1.6 1.7

CAPITAL REVENUE 0.1 0.0 0.1 0.1 0.1 0.2 3.0 1.3 2.0 2.1 2.4 1.0 0.9 0.8 0.7

Divestment Proceeds 0.0 0.0 0.0 0.0 0.0 0.2 2.0 0.5 1.3 1.0 0.7 0.0 0.0 0.0 00

Other 0.1 0.0 0.1 0.1 0.1 0.0 1.0 0.8 0.7 1.1 1.7 1.0 0.9 0.8 0.0

Source: Ministry of Finance and IMF staff estimates.

82

TABLE AS.4: JAMAICA - CENTRAL GOVERNMENT EXPENDITURE

(J$ million)

1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992193 1993/94 1994/95 1995/96

TOTAL EXPENDITURES 2358.2 2518.0 2902.1 3335.3 3934.0 4719.9 5508 9 6855.6 7669 6 8841.8 13018.3 20381.5 29996.7 40269.0 56087.0

CURRENT EXPENDITURES 1715.3 1861.4 2394.0 2817.9 3253.0 3755.3 4189.3 5136.0 6137.0 74700 10638.9 16321.7 25369.3 34392.8 46707.9Wages and Salanes /1 734.4 843.0 9670 1072 0 1083.0 1260.0 1335.4 1501.5 2540.0 2857.5 3886.4 3886.4 10295.4 11142.6 15429.3Interest 424.6 508.7 785.6 949.0 1300 0 1515.0 1612.0 1885.4 2344.6 2926.0 4140.6 6873.0 9876.2 15833.7 20486.1O/W:Foreign 147.3 182.6 264.6 468.8 8350 830.0 843.0 988.4 1448.0 1726.0 2073.0 3211.9 3946.1 4819.4 5716.9

Other Goods & Services /1 556.3 509.7 641.4 796.9 870.0 980.3 1241.9 1749.1 1252.4 1686.5 2611.9 5562.3 5197.7 7416.5 10792.5

CAPITAL EXPENDITURES 642.9 656 6 508.1 517.4 6810 964.6 1319.6 1719.6 1532.6 1371.8 2379.4 4059.8 4627.4 5876.2 9379.1Fixed Investment 406.8 446.3 296.8 293.2 309.3 720.5 733.6 1120.5 1097.0 825 6 1475.3 3176.1 3151 4Pass-throughs /2 - - 88.9 702 90.2 42.6 156.5 176.5 42.7 580 0.0 0.0 0.0Other (Transfers, portfolio invest. & 236.1 210.3 122.4 154.0 281.5 201 5 429.5 422.6 392.9 488.2 904.1 883.7 1476.0 5876.2 9379.1

net lending)

(percent of GDP)

TOTAL EXPENDITURES 44.1 41 0 38 3 33.8 31 5 32 6 33.8 37.0 31 0 26.6 26.0 26 7 29.2 31.0 36.2

CURRENT EXPENDITURES 32.1 30.3 31.6 28 6 26.0 26 0 25 7 27.7 24.8 22 5 21.2 21.4 24.7 26.5 30.1Wages and Salaries /1 13.7 13.7 12.8 10.9 8.7 8 7 8.2 8.1 10.3 8.6 7.8 5.1 10.0 8.6 10.0Interest 7.9 8.3 10.4 96 10.4 10.5 99 10.2 9.5 88 8.3 9.0 9.6 12.2 13.2ONV: Foreign 2.8 3.0 3.5 4 8 6.7 5 7 5 2 5.3 5.8 5.2 4.1 4.2 3.8 3.7 3.7

OtterGoods&Services /1 10.4 8.3 8.5 8.1 7.0 68 7.6 94 5.1 5.1 5.2 73 5.1 5.7 7.0

CAPITAL EXPENDITURES 12.0 10.7 6.7 5.2 5.4 6.7 8.1 9.3 6.2 4.1 4.7 5.3 4.5 4.5 6.1Frxed Investment 7.6 7.3 39 3.0 2.5 5.0 4.5 6.0 4 4 2.5 2.9 4 2 31Pass-1hroughs /2 0.0 0.0 1.2 0.7 0.7 0.3 1.0 1.0 0.2 0.2 0.0 0.0 0.0Other (transfers, portfolio invest & 4.4 3.4 1.6 16 2.3 1.4 2.6 2.3 1 6 1.5 1 8 1 2 1.4 4 5 6.1

net lending)

/1 Methodology revised for FY 1990/91 and later years - Wages and salaries includes teachers salaries and civil service allowances For earlier years, they are included in "other goods and services"/2 Guaranteed on-lending to the private sector.

Source: Ministry of Finance and IW staff estimates

83

TABLE A5.5: JAMAJCA - BANK OF JAMAICA LOSSES(JS million)

1984/85 1985186 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96

INCOME 294.3 265.1 148.8 165.6 161.4 407.6 444.7 364.0 966.3 1688.6

Local 218.0 180.9 116.1 151.1 143.6 363.4 433.8 289.4 840.8 1425.8

Loral registered stock .. .. 55.9 26.1 60.8 209.7 205.5 167.4 661.7 1072.4

Treasury bills .. .. .. .. 16.3 51.9 71.0 37.9 25.9 200.4

Interest current accounts .. .. 60.2 125.0 33.0 50.5 54.2 15.2 57.7 70.1

Other .. .. .. .. 33.5 51.3 103.1 68.9 95.5 82.9

Foreign 76.3 84.2 32.7 14.5 17.8 44.2 10.9 74.6 125.5 262.8

EXPENSES 870.3 1123.0 970.8 1041.0 1251.6 1630.3 1859.6 2985.7 4919.7 3724.4

Wages and admin. expenses .. 46.1 69.1 99.9 108.5 86.3 107.4 152.9 250.7 317.8

Current expenses 29.3 .. 32.6 38.9 27.3 14.5 36.1 25.8 83.7 142.4

Domestic interest .. 255.7 316.5 411.9 702.8 921.7 1053.3 1334.2 2624.5 2179.0

Foreign interest 517.6 694.9 552.0 490.0 406.6 407.5 569.6 1073.7 1400.4 1085.2

Other /1 323.4 126.3 0.6 0.3 6.4 200.3 93.2 399.1 560.4 0.0

BALANCE -576.0 457.9 -822.0 -875.4 -1090.2 -1222.7 -1414.9 -2621.7 -3953.4 -2035.8 -3078.2 138.5

/1 Includes auction expenses, exchanges subsidies, interest afrears.

Source: Bank of Jamaica and IMF.

84

TABLE A6.1: JAMAICA - MONEY SUPPLY

(JS million)

CURRENCY DEMAND OTHERWITH THE DEPOSITS TOTAL TIME SAVINGS TOTAL TOTAL ITEMS TOTAL

PUBLIC (adj.) DEPOSITS DEPOSITS (TIME/SAV.) (net)

END OF PERIOD1987

March 658.5 1157.1 1815.6 1102.4 2860.6 3963.0 5778.6 -5231.3 547.3June 681.1 1215.3 1896.4 1116.6 3043.8 4160.4 6056.8 -5399.7 657.1September 700.7 1047.2 1747.9 1124.7 3187.8 4312.5 6060.4 -3777.3 2283.1December 909.3 1036.9 1946.2 1119.4 3378.1 4497.5 6443.7 -3824.6 2619.1

1988March 761.5 1023.6 1785.1 1251.0 3584.8 4835.8 6620.9 -5000.2 1620.7June 887.3 1261.3 2148.6 1311.3 3740.7 5052.0 7200.6 -4903.7 2296.9September 956.9 1695.6 2652.5 1426.8 3771.6 5198.4 7850.9 -5262.5 2588.4December 1281.5 1627.3 2908.8 1625.5 4365.8 5991.3 8900.1 -5805.9 3094.2





1993January 3481.5 7049.8 10531.3 4456.5 13342.8 17799.3 28330.6 -20042.1 8288.5February 3493.8 7804.6 11298.4 4433.2 13798.9 18232.1 29530.5 -20569.9 8960.6March 3527.6 8342.3 11869.9 4042.9 14595.1 18638.0 30507.9 -18971.2 11536.7

85

TABLE A6.1: JAMAICA - MONEY SUPPLY (Contnued)

(J$ million)

CURRENCY DEMAND OTHERWITH THE DEPOSITS TOTAL TIME SAVINGS TOTAL TOTAL ITEMS TOTAL

PUBLIC (adj.) DEPOSITS DEPOSITS (TIME/SAV.) (net)

1993 (Continued)April 3773.7 7748.6 11522.3 4608.3 15573.0 20181.3 31703.6 -19307.2 12396.4May 3732.7 8478.6 12211.3 4620.3 15906.0 20526.3 32737.6 -20677.3 12060.3June 3748.2 8299.3 12047.5 4685.2 16524.4 21209.6 33257.1 -20894.7 12362.4July 4213.9 8486.1 12700.0 5568.7 16629.7 22198.4 34898.4 -19842.3 15056.1August 4109.9 8889.0 12998.9 5322.2 16746.7 22068.9 35067.8 -17275.3 17792.5September 4009.0 8648.1 12657.1 5645.5 16802.7 22448.2 35105.3 -18837.1 16268.2October 4349.2 8723.5 13072.7 6178.6 17344.4 23523.0 36595.7 -16982.1 19613.6November 4300.2 9301.2 13601.4 6464.2 17438.9 23903.1 37504.5 -15689.1 21815.4December 5215.6 9183.1 14398.7 6340.5 18179.6 24520.1 38918.8 -18804.7 20114.1

1994January 4707.2 9433.9 14141.1 7197.9 18111.0 25308.9 39450.0 -18579.0 20871.0February 4628.3 10370.4 14998.7 7969.7 18323.1 26292.8 41291.5 -16968.6 24322.9March 4971.9 11266.2 16238.1 8186.0 18644.1 26830.1 43068.2 -19764.2 23304.0April 4822.8 11111.6 15934.4 9049.3 19819.2 28868.5 44802.9 -15983.3 28819.6May 4675.3 11258.8 15934.1 8967.0 19853.2 28820.2 44754.3 -17500.8 27253.5June 4800.9 11426.0 16226.9 9511.7 20170.5 29682.2 45909.1 -17202.4 28706.7July 5296.3 7820.0 13116.3 10750.5 21983.1 32733.6 45849.9 -13784.7 32065.2August 5151.2 8536.9 13688.1 11009.1 21924.8 32933.9 46622.0 -11630.0 34992.0September 5292.4 9357.8 14650.2 11023.2 22424.0 33447.2 48097.4 -16432.9 31664.5October 5457.7 10181.8 15639.5 10924.4 23787.6 34712.0 50351.5 -12159.5 38192.0November 5539.8 10932.6 16472.4 11696.7 23782.9 35479.6 51952.0 -18575.9 33376.1December 7115.1 9258.9 16374.0 12042.8 24733.2 36776.0 53150.0 -21897.9 31252.1

1995January 6221.3 10517.4 16738.7 12372.5 25022.2 37394.7 54133.4 -20166.4 33967.0February 6288.8 10334.4 16623.2 12252.3 25555.3 37807.6 54430.8 -20546.4 33884.4March 6594.5 10290.0 16884.5 12254.3 26373.3 38627.6 55512.1 -25359.1 30153.0April 6845.0 10961.9 17806.9 12402.0 28040.8 40442.8 58249.7 -17040.0 41209.7May 6568.5 10854.9 17423.4 12162.2 28666.9 40829.1 58252.5 -18923.8 39328.7June 6923.7 10906.0 17829.7 13083.3 28912.6 41995.9 59825.6 -18989.4 40836.2July 6880.2 12145.9 19026.1 15052.8 30492.2 45545.0 64571.1 -15278.0 49293.1August 7337.4 12407.9 19745.3 14629.6 31425.5 46055.1 65800.4 -15412.3 50388.1September 7477.8 11065.4 18543.2 14907.0 32101.4 47008.4 65551.6 -11867.8 53683.8October 7416.2 12863.9 20080.1 15773.3 33653.8 49427.1 69507.2 -10714.2 58793.0November 7605.5 13543.0 21148.5 15782.4 33778.5 49560.9 70709.4 -14010.2 56699.2

Source: Bank of Jamaica

86

TABLE A6.2: JAMAICA - SUMMARY ACCOUNTS OF THE BANK OF JAMAICA

(JS million)

(As of March 31st)

1989 1990 1991 1992 1993 1994

NET INTERNATIONAL RESERVES -1688.2 -2085.1 -2218.0 -6345.5 -1692.0 1856.0Assets 994.5 819.3 1512.4 4335.0 6218.6 14143.0Liabilities -2682.7 -2904.4 -3730.3 -10680.4 -7910.6 -12287.0

NET DOMESTIC ASSETS 3000.8 3447.8 3585.5 9004.9 4489.7 3458.1

Net Claims on the Public Sector 4796.8 5735.6 5335.5 7359.5 6931.8 8236.6Net Claims on Central Government 1105.3 1037.5 -213.2 -1034.9 -7642.8 -8507.8

Treasury Bills 306.8 29.4 1.3 0.8 1087.1 653.2Other Securities 2422.9 2468.5 2352.0 4684.7 2631.6 5628.0Other Claims 917.1 925.1 469.9 -264.2 -520.6 -1888.2Consolidated Fund Deposits -2146.9 -1932.9 -2610.7 -4171.8 -8357.7 -11057.9Other Deposits -382.0 -451.9 -411.8 -683.5 -2482.3 -1842.2Certificates of Deposit -12.6 -0.7 -13.9 -600.9 -0.9 -2.7

Net Claims of SPE -193.2 -830.9 -905.7 -183.6 -74.7 906.2Net Claims on other Public Sector -906.7 -1129.0 -1215.4 -2496.2 -726.5 -2030.2Operating Losses 4405.5 5628.1 7042.9 9664.6 13618.0 12338.7Net Unclassified Assets 385.9 1029.9 626.9 1409.6 1757.8 5529.7

Net Credit to Commercial Banks -3160.0 -3375.8 -3164.0 -5559.8 -10447.8 -14429.3Credit to Commercial Banks 707.3 985.0 169.9 111.4 0.0 0.0Liabilities to Commercial Banks -3867.3 -4360.8 -3333.9 -5671.2 -10447.8 -14429.3

Bank of Jamaica CDs -1096.7 -565.2 -605.9 -1601.9 -1944.0 -1974.7Deposits -2770.6 -3795.6 -2728.0 -4069.3 -8503.8 -12454.6

Net Credit to OFI -419.0 -480.7 -700.6 -1566.8 -1522.1 -1315.6Claims 2.0 2.0 2.0 0.0 0.0 0.0

Deposits -130.2 -130.7 -210.0 -378.4 -1069.7 -1289.3Bank of Jamaica CDs -290.8 -352.0 -492.6 -1188.4 -452.4 -26.3

Valuabon Adjustment 4646.3 5882.6 6901.8 20866.8 17094.9 21298.0Adjustment for Unclassified Foreign Exchange ItemsBank of Jamaica CDs Held by Private Sector -541.4 -661.1 -712.4 -657.4 -42.4 -1102.0Allocation of SDRs -289.3 -374.2 -475.9 -1555.3 -1289.6 -2020.2M&LT Foreign Liabilities -2032.7 -3278.6 -3598.9 -9882.1 -6235.2 -7209.4

CURRENCY ISSUE 1312.9 1362.9 1691.1 2804.5 3830.9 5314.0Currrency Outside Banks 1185.9 1246.1 1592.1 2544.0 3527.6 4972.0Currency With Banks 127.0 116.8 99.0 260.5 303.3 342.0

MEMORANDUM ITEMExchange Rate J$/US$ 5.5 7.0 8.4 27.3 22.2 33.1Stock of Bank of Jamaica CDs 2792.3 2497.3 2871.2 5312.4 3409.4 3623.3

Source: Bank of Jamaica and IMF.

87

TABLE A6.3: JAMAICA - SUMMARY ACCOUNTS OF COMMERCIAL BANKS(J$ million)

(As of March 31st)

1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

NET FOREIGN ASSETS 27.4 124.6 38.1 -111.8 -121.8 -286.8 -310.2 -286.5 -184.4 2420.4 499.5 4297.3

Assets 180.7 307.9 247.4 302.9 332.1 318.9 625.4 654.6 1182.3 6371.5 6637.1 13068.6Liabilities -153.3 -183.3 -209.3 -414.7 -453.9 -605.7 -935.6 -941.1 -1366.7 -3951.1 -6137.6 -8771.3

NETCLAIMSONBANKOFJAMAICA 97.8 515.6 844.9 1279.5 2050.9 2154.0 3419.4 3816.8 4224.2 7056.1 10127.8 14344.4CLAIMS OF BANK OF JAMAICA 104.0 520.8 864.2 1309.1 2068.4 2356.4 3682.8 4003.2 4401.5 7216.1 10984.0 14461.6

Currency 32.7 33.6 39.8 50.8 78.8 79.0 127.0 116.8 99.0 260.5 303.3Certificates of Deposit - - - 194.0 523.7 169.2 1028.9 565.2 605 9 1601.2 1944.0 1977.9Special Deposits - 50.8 58.0 - - - - - - -

Other Deposits 71.3 436.4 766.4 1064.3 1465.9 2108.2 2526.9 3321.2 3696.6 5354.4 8736.7 12483.7

LIABILITIES TO BANK OF JAMAICA -6.2 -5.2 -19.3 -29.6 -17.5 -202.4 -263.4 -186.4 -177.3 -160.0 -856.2 -117.2

NET DOMESTIC ASSETS 2291.3 2420.0 2852.5 3271.3 3563.0 4903.9 5626.8 6128.1 7658.5 9788.1 19283.9 24883.6

NETCLAWMSOFPUBLICSECTOR 790.3 747.5 872.5 1174.6 961.5 1271.8 1208.8 872.6 1171.1 1627.6 5130.8 1057.7NET CLAIMS ON CENTRAL GOVERNMENT 649.2 704.2 872.4 1287.6 1658.8 1609.6 1441.2 1034.2 1553.3 2366.7 6613.4 5315.3

TreasuryBills 410.4 400.0 514.2 724.2 713.2 799.6 1226.5 1156.4 1334.4 1707.3 2024.6 2783.3Other Securibes 257.3 378.2 463.3 466.5 476.5 514.7 395.6 118.0 163.7 651.5 5011.3 4611.8Other Claims 9.5 12.4 13.8 218.7 650.7 665.0 156.4 170.7 432.4 561.1 1174.6 1200.7Deposits -28.0 -86.4 -118.9 -121.8 -181.6 -369.7 -337.3 410.9 -377.2 -553.2 -1597.1 -3280.5

NET CLAIMS ON SELECTED PUBL. ENTERP 166.8 112.6 2.0 -120.6 -644.7 -286.5 -191.2 -98.1 -251.4 -510.1 -947.7 -3173.4NET CLAIMS ON OTHER PUBLIC SECTOR

PUBLIC SECTOR -25.7 -69.3 -1.9 7.6 -52.6 -51.3 41.2 -63.5 -130.8 -229.0 -534.9 -1084.2NET CREDIT TO OTHER FINANCIAL

INSTITUTIONS -82.9 -134.8 -238.1 -357.3 -462.8 -509.0 -540.7 -713.7 -1434.2 -1997.9 -3182.7 -3725.4CREDIT TO PRIVATE SECTOR 1688.1 2168.1 2349.3 2605.3 3150.3 4247.7 5528.2 7139.8 8466.5 10853.9 15593.9 23827.6NET UNCLASSIFIED ASSETS -104.2 -360.8 -131.2 -151.3 -86.0 -106.6 -569.5 -1170.6 -544.9 -695.5 1741.9 3723.7

MEDIUM AND LONG TERM FOREIGNLLABLMES 15.9 31.8 43.3 38.3 51.6 68.2 -70.7 -99.4 -106.2 -108.9 -134.8 -152.6

SPECIAL DEPOSITS 0.0 50.8 50.8 0.0 0.0 .. ..

LIABILITIES TO PRIVATE SECTOR 2400.6 2977.6 3641.4 4400.7 5440.5 6702.9 8665.3 9559.0 11592.1 19155.7 29777.6 31439.5

Demand deposits 387.1 433.1 553.7 661.1 832.9 1100.1 1533.4 1591.1 2120.8 4577.3 7646.6 7329.5Timerdeposits 761.5 1074.3 1298.6 1096.2 1102.4 1251.0 1646.9 4975.4 1987.4 2987.0 4042.9 13920.2Savings deposits 1045.5 1188.1 1412.3 2163.4 2860.6 3584.8 4565.0 1919.8 6129.9 9247.9 14595.1 4261.8Oher 206.5 282.1 376.8 480.0 644.6 767.0 920.0 1072.7 1354.0 2343.5 3493.0 5928.0

Source: Bank of Jamaica and IMF. 88

TABLE A6.4 JAMAICA - DISTRIBUTION OF COMMERCIAL BANKS LOANS AND ADVANCES

(As of March 31 st)

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

(JS million)

TOTAL 900.9 1088.1 1494.8 1963.1 2447.7 2745.8 2876.6 3270.2 4030.9 5216.9 6060.5 7766.6 9413.4 12030.5 16842.6 259066

Agrculture 93.1 1178 1929 230.8 2655 4010 422.1 4609 4316 5300 704.3 721.1 856.8 1013.7 1078.4 1545.1

Mining 5.8 63 7.9 12.0 116 10.0 8.1 7.1 11.2 164 195 35.1 33.3 46.7 130.5 157.4

Manufacturng 164.1 213.9 317.3 3967 520.4 681.1 733.2 737.1 8854 1059.5 1189.2 1432.6 1570.1 1929.3 2188.6 3034.0

Sugar/Rum 39.0 45.3 741 79.8 87.4 111 1 118.9 67.5 59.0 39.6 36.9 479 953 135.7 94.0 388.2

Food/Drink 30.6 36.6 59.9 95.3 119.7 144.1 127.3 127.6 159.8 200.3 218.3 275.0 315.0 368.5 448.1 592.5

Textiles and Footwear /1 81 1 870 1158 1453 159.0 1621 174.6 199.7 245.8 301.1

Cement 9.2 13.1 9.8 7.6 12.0 9 5 16 5 27 0 33.7 46.0 1621 49.4 50.0 52.4 99.3 158.9

Chemicals 11.9 17.4 185 23.5 28.0 39.1 41.7 55.0 46.3 85.7 94.5 87.7 98.5 207.6 1465 299.1

Other 73.4 101.5 1550 190.5 2733 377.3 347.7 373.0 4708 5426 5184 8105 8367 965.4 1154.9 1294.2

Construction Development 126.1 127.3 181.3 326.5 514.0 617.4 658.5 602.7 6807 9904 14065 1891 1 2103.8 2151.7 3074.7 3719.9

Construction 40.8 37.3 71 2 1402 2582 3281 365.0 293.7 3457 539.7 830.6 1276.5 1525.6 1509.2 2385.6 3020.3

Land DevelopmenVAcquisiton 85.3 90.0 1101 1863 2558 289.3 293.5 309.0 3350 4507 575.9 614.6 578.2 642.5 689.1 699.6

Financiallnstitutions 35.5 23.0 34.5 38.9 58.6 67.3 59.7 55.5 109.1 96.6 145.7 2171 2648 5939 275.5 1191.0

Transport 59.2 108.7 1458 2325 2853 3343 3572 4122 5103 6402 780.5 1050.2 1163.9 1068.9 1613.0 2652.7

Electricity, Water, Gas 29.2 40.9 591 599 394 273 18.4 17.5 48 129 39.0 1151 308 26.9 75.5 2080

Government 28.5 235 24.1 30.9 106.6 44.0 69.2 371.9 692.3 883.1 467.2 5514 826.8 8114 930.6 1783.7

Distnbubon 80.5 896 1221 1265 1345 1074 110.3 1071 1163 176.0 205.9 295.2 426.1 712.8 1030.4 1637.7

Toursm, Entertainment 45.8 72.4 886 1137 1299 1489 1480 2053 2630 3742 5358 6607 7941 779.0 14322 2084.1

Professional Services 65.5 76 7 128 6 226 2 208 8 164 0 154.2 145 4 151.1 192 8 276.9 411 6 672 2 1447 3 2365.4 3743.0

Personal 167.6 188.0 192.6 168.5 1731 143.1 1377 1475 1751 2448 2900 3854 6707 14489 2647.8 4150.1

89

TABLE A6.4: JAMAICA - DISTRIBUTION OF COMMERCIAL BANKS LOANS AND ADVANCES (Contnued)

(As of March 31st)

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

(Percent of Total)Agficulture 10.3 10.8 12.9 11.8 10.8 14.6 14.7 14.1 10.7 10.2 11.6 9.3 9.1 8.4 6.4 6.0Mining 0.6 0.6 0.5 0.6 0.5 0.4 0.3 0.2 0.3 0.3 0.3 0.5 0.4 0.4 0.8 0.6Manufacturing 18.2 19.7 21.2 20.2 21.3 24.8 25.5 22.5 22.0 20.3 19.6 18.4 16.7 16.0 13.0 11.7

Sugar/Rum 4.3 4.2 5.0 4.1 3.6 4.0 4.1 2.1 1.5 0.8 0.6 0.6 1.0 1.1 0.6 1.5Food/Drink 3.4 3.4 4.0 4.9 4.9 5.2 4.4 3.9 4.0 3.8 3.6 3.5 3.3 3.1 2.7 2.3Textiles and Footwear /1 2.8 2.7 2.9 2.8 2.6 2.1 1.9 1.7 1.5 1.2Cement 1.0 1.2 0.7 0.4 0.5 0.3 0.6 0.8 0.8 0.9 2.7 0.6 0.5 0.4 0.6 0.6Chemicals 1.3 1.6 1.2 1.2 1.1 1.4 1.4 1.7 1.1 1.6 1.6 1.1 1.0 1.7 0.9 1.2Other 8.1 9.3 10.4 9.7 11.2 13.7 12.1 11.4 11.7 10.4 8.6 10.4 8.9 8.0 6.9 5.0

Construction Development 14.0 11.7 12.1 16.6 21.0 22.5 22.9 18.4 16.9 19.0 23.2 24.3 22.3 17.9 18.3 14.4Construcbon 4.5 3.4 4.8 7.1 10.5 11.9 12.7 9.0 8.6 10.3 13.7 16.4 16.2 12.5 14.2 11.7Land Development/Acquisition 9.5 8.3 7.4 9.5 10.5 10.5 10.2 9.4 8.3 8.6 9.5 7.9 6.1 5.3 4.1 2.7

Financial Instutions 3.9 2.1 2.3 2.0 2.4 2.5 2.1 1.7 2.7 1.9 2.4 2.8 2.8 4.9 1.6 4.6Transport 6.6 10.0 9.8 11.8 11.7 12.2 12.4 12.6 12.7 12.3 12.9 13.5 12.4 8.9 9.6 10.2Edcity, Wvter, Gas 3.2 3.8 4.0 3.1 1.6 1.0 0.6 0.5 0.1 0.2 0.6 1.5 0.3 0.2 0.4 0.8Government 3.2 2.2 1.6 1.6 4.4 1.6 2.4 11.4 17.2 16.9 7.7 7.1 8.8 6.7 5.5 6.9Distribubon 8.9 8.2 8.2 6.4 5.5 3.9 3.8 3.3 2.9 3.4 3.4 3.8 4.5 5.9 6.1 6.3Tourism, Enbrtinment 5.1 6.7 5.9 5.8 5.3 5.4 5.1 6.3 6.5 7.2 8.8 8.5 8.4 6.5 8.5 8.0ProfessionalServices 7.3 7.0 8.6 11.5 8.5 6.0 5.4 4.4 3.7 3.7 4.6 5.3 7.1 12.0 14.0 14.4Personal 18.6 17.3 12.9 8.6 7.1 5.2 4.8 4.5 4.3 4.7 4.8 5.0 7.1 12.0 15.7 16.0

/1 Induded in Ohwr Manufacbturing for 1979-84.


90

TABLE A6.5: JAMAICA - SELECTED INTEREST RATES

(As of March 31 st)

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

BOJ CERTIFICATES OF DEPOSITS 1/ .. 27.9 18.0 18.4 17.4 28.5 30.6 50.0 20.7 50.0 27.0TREASURY BILL (90 DAYS) 2/ 17.1 23.8 16.9 19.7 17.8 25.4 28.5 44.3 19.5 40.0 20.6LONG-TERM GOVERNMENT BONDS 19.4 25.8 20.7 20.5 19.5 29.0 26.5 30.5 30.5 26.8 26.8

TIME DEPCSITS 3/ 19.6 14.8 15.5 14.3 20.2 24.5 27.5 23.0 39.8 27.9 19.7 /5

3-6 MONTHS (WEIGHTED) 20.7 15.4 16.1 15.2 19.5 26.9 29.0 43.4 13-27 21-53 14.5-246-12 MONTHS (WEIGHTED) 19.7 15.2 15.5 15.2 18.5 23.6 23.0 41.4 13.5-27 20-50 13-21

SAVINGS DEPOSITS 15.0 20.0 15.0 15.0 13.0 18.0 15-21 15-23 15-24 15-27 15-30PRIME LENDING RATE 4/ 21.9 23.0 23.0 23.0 31.0 36.0 40.1 49.6

COMPARABLE INTEREST RATES

TREASURY BILLS (90 DAYS):TRINIDAD&TOBAGO 3.5 4.0 4.4 4.8 6.9 7.5 7.5 9.3 9.3 10.1 7.2UNITED KINGDOM 11.6 10.4 9.3 8.5 13.0 15.0 12.5 10.5 5.4 4.9 6.1UNITED STATES 7.5 6.0 5.6 5.7 8.8 7.9 5.9 4.1 3.0 3.5 5.7

MEMORANDUM ITEM:CHANGE IN CONSUMER PRICES (pt. to pt.) 26.0 14.8 6.7 8.8 17.2 29.8 80.2 40.2 30.1 26.9 25.5

1/ The Bank of Jamaica started issuing certificates of deposit in November 1985.2/ Discount rate.3/ Overall average weighted rate of time deposits ranging from call money to deposits of 24 months and above. End of year.4/ Base rate to which commissions and fees are added.5/ September 1995.


91

TABLE Al. 1: JAMAICA - PROOUCTION OF SELECTED AGRICULTURE CROPS

CROPS UNIT 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

EXPORT CROPSSugarcar '000 tons 2,810 2,492 2,549 2,347 2,450 2,296 2.239 2,014 2.603 2,331 2,613 2,775 2,602 2715 2513

Banan metr ttns 57,488 74,996 77,104 62,m7 39,538 42,612 45,770 50,259 48,795 52,216 61,533 66,082 65,118 67039 66793

PlanbU metonto" 25.077 24,143 28,409 25,101 29,515 30,404 30,563 28.168 26,173 9,916 27,568 26,692 28,469 35811 35372

tOrange '000 bows 1,121 6T7 854 823 735 1,094 1,088 1.960 1,320 1,500 1,556 1,039 1,432 na. n.a.

Grapefrut 'ODD box 715 682 754 526 408 463 729 445 528 600 536 316 416 n a. na.

Ortaniquas, etc. 000 bat 483 295 242 315 287 369 285 129 352 401 189 117 257 n.a. n.a.

Coconut '000nuts 163 136 98 95 105 110 151 162 174 73 n7 96 114 137 144

Cdh.e metrttDns 12,637 7,862 8,646 9,306 9,947 6,580 8,402 10,089 12,166 4,861 7,156 9,434 9,505 10501 9114

Cocoa m ttons 4,378 4,381 6,021 5,754 7,030 5,949 6,013 7,965 3,871 3,465 4,973 4,757 6,418 5366 7353

Pino metnns 943 3,055 1,762 2,751 3,201 3,269 2,056 2,392 1,920 3,720 1,583 458 2,100 1300 n.a.

Ghger metlctns 397 446 535 402 552 613 1,094 836 632 660 865 827 761 730 783

CROPS FOR DOMESTIC CONSUMPTIONROOT CROPSCassava metbIc tao 23,403 21,880 16,957 17,188 19,677 17,854 16,522 17,020 13,576 10,128 11,803 12.111 15,300 21054 19013

Tanbs,Cco,atc. macbns 29,989 28,207 25,595 24,989 31,029 31,465 31.619 26,769 25,781 22,115 23,255 22,225 26,729 34299 36379

Irish Potao m c bns 7,608 13,808 7,383 7.603 12,310 7,075 5,439 9,443 9,893 10,818 14,296 7,548 6,936 9134 12186

SwetPta metrcbtns 26,238 30,228 21,274 24,090 35,898 31,676 26,978 24,322 19,800 21,818 21,462 17,459 23,791 26763 28809

Yams metnctns 137,718 136,182 116,979 130,634 149,061 163,767 164.973 175,452 166,866 132,373 161,463 186,104 214,387 221928 235907

VEGETABLES

Betot merbicb tns 571 562 585 511 763 683 650 690 889 861 875 631 967 1233 1518

Cabbage mebictDns 14,332 15,796 16,293 17,152 17,954 16,124 15,159 14,195 13,069 17,413 17,336 14,999 14,886 21647 24981

Carrotb mecb tns 10,745 14,554 14,804 15,665 17,635 14,580 14,674 15,293 11,598 14,179 15,530 15,225 18,819 22770 27517

Caui8Ivr metucbns 11 11 44 97 174 349 262 207 217 371 551 399 494 800 991

Celry mb tons 79 35 39 69 58 93 82 100 70 81 115 78 118 72 62

Choetto metric tons 3,881 5,184 4,454 4,355 6,032 4,884 4,469 4,471 3,258 4,289 4,726 3,493 3,565 4534 4635

Cucumbr mdlbtons 6,135 5,990 5,124 6,486 7,135 11,882 13,182 13,567 8,565 8,202 8,115 6,885 9,137 12539 15980

Eggplant mntrk ons 50 51 55 44 67 49 624 320 39 194 80 61 209 368 272

Ldt" metowctons 1,066 1,183 1,485 2,090 2,081 2.025 2,101 2,417 2,248 3,072 2,355 3,379 3,873 3830 5056

O meb tons 1,111 1,315 1,524 1,540 2,243 1.331 1,188 1,336 851 ,119 1,255 1,177 1,855 2053 2227

Pepper metctns 1,854 2,482 1,962 3,263 6,041 7,096 7,387 7,596 4,617 3,802 4,551 5,146 8,197 11487 i5800

PumpkLa metr tons 25,172 27,620 23,317 32,473 39,007 30,345 25,659 26,947 21,763 23,696 26,247 26,337 34,187 34708 40385

Tomatm mebck bns 23,026 22,536 17,032 19,162 29,539 19,500 16,457 15,966 12,957 15,270 14,261 10,936 14,068 17398 30133

Wabtmelon mebw tons 3,002 4,866 2,905 3,491 5,518 2,476 2,567 3,860 3,512 4,027 6.080 4,787 8,103 9584 12684

92

TASLE A7 1. JAMAICA - PRODUCTION OF SELECTED AGRICULTURE CROPS (Confnued)

CROPS UNIT 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994

CONDIMENTS

Scallion mefic tons 3,486 5,706 2,400 3,972 4,521 3.459 3,061 4,466 2,735 3,036 4.211 2,645 6,981 9.567 13,227Onions mS*IICns 29,969 28,207 25,595 24,989 31,029 31,465 31,619 26,769 25,781 22,115 23,255 22,225 26,729 34.299 36,379Thyme metons 187 195 193 201 202 167 195 232 211 271 353 396 839 781 951

PULSES

Pea and Beans mfttD tns 8,039 8,768 7,372 8,092 9,217 9,227 9,725 9,218 7.191 7,708 8,133 9,115 9,491 10,011 11,250

Peanuts meeb tons 220 2,085 2,263 2,596 2,533 3,216 2,134 2,870 1,598 2.431 1,861 2,386 4,109 4,381 4,257

CEREALSCorn mebtc tons 4,372 4,542 3,094 3,653 3,680 3,891 4.559 3,984 2.062 2,914 2,376 2,929 3.8o0 3,299 3,773Rice tDns 2,389 1,860 1,536 3.387 5,364 4,260 2,471 2,257 1.731 513 220 562 507 269 306

Source. SWBital Instte d Jamanca

93

Table A7.2: JAMAICA - VALUE ADDED IN AGRIGULTURE, FORESTRY AND FISHING(JS million)

1986 1987 1988 1989 1990 1991 1992 1993 1994

(current prices)AGRICULTURE, FORESTRY ANDFISHING 1,048.80 1,276.29 1,392.60 1,622.59 1,973.12 3,072.94 5,777.38 8,023.17 1,191.21

EXPORT AGRICULTURE 150.70 180.73 201.60 192.77 257.37 366.21 781.86 966.87 1,152.44Sugarcane 89.0 104.78 130.67 112.44 174.32 257.47Other main exports 61.66 75.95 70.93 80.33 83.05 108.75 263.81 306.81 375.64

DOMESTIC AGRICULTURE 665.65 816.49 896.40 1,098.69 1,250.68 2,013.03 3,748.86 5,507.62 8,657.93Rootcrops 296.91 408.83 485.00 635.95 662.67 1,130.62 2,172.41 2,807.14 4,620.40Other primary products 368.73 407.66 411.40 462.73 588.01 882.41 1,576.45 2,700.48 4,037.53

LIVESTOCK & HUNTING 150.35 182.08 195.27 214.92 335.95 527.10 958.91 1,152.00 1,545.40

FORESTRY & LOGGING 27.10 33.00 35.37 35.47 27.57 41.97 49.66 81.24 108.66

FISHING 55.02 63.58 63.96 80.74 101.56 124.64 238.10 314.63 447.71

(1986 prices)

AGRICULTURE, FORESTRY ANDFISHING 1,048.80 1,102.93 1,065.34 968.48 1,082.30 1,078.5 1,219.2 1,342.4 1,442.7

EXPORT AGRICULTURE 150.70 151.2 162.9 149.5 159.4 158.5 158.8 165.4 169.0Sugarane 89.04 80.1 103.5 92.7 103.9 110.3 103.3 109.7 101.5Owr main exports 61.66 71.1 59.4 56.8 55.5 48.2 55.6 55.8 57.5

DOMESTIC AGRICULTURE 665.65 696.8 650.6 572.9 647.4 651.9 797.6 915.4 1,030.5Rootcrops 315.22 290.9 255.5 303.7 310.0 310.0 359.9 392.0 421.3Other pnrnauy products 368.73 381.6 359.8 317.4 343.7 341.9 437.7 523.5 609.2

LIVESTOCK&HUNTING 150.34 169.1 167.6 170.3 205.5 200.8 195.0 196.2 185.7

FORESTRY& LOGGING 27.10 31.5 35.3 257.3 140.0 153.6 160.3 157.2 144.2

FISHING 55.02 54.4 48.9 50.0 53.9 519.4 517.4 49.6 53.0

Source: Stabstical lns5tut of Jamaica.

94

TABLE A7 3 JAMAICA - TOURISM STATISTICS(thousands)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 /1

TOTAL VISITORS 543 0 551 9 670.2 782 9 843 8 846 7 954 6 1037 6 1020 3 1163 2 12361 1340 5 15631 1616 3 1575 7 1321 2

STOPOVER VISITORS 395 3 406 4 467.8 5662 603 4 571 7 6636 738 8 648 9 7148 840 8 844 6 9090 978 7 976 6 841 3CRUISE VISITORS 133 4 139 7 194 4 2102 231.0 261 5 278 5 292 2 367 7 4441 385 2 490 5 649 5 629 6 595 0 4761ARMEDFORCESVISITORS 143 59 80 66 9.3 135 125 67 37 44 101 54 46 8.0 40 37

ORIGIN OF STOPOVERVISITORS 3953 4064 4678 5662 6034 5717 6636 7388 6489 7148 8408 8446 9090 9787 9766 8414

UNITED STATES 239 7 272 4 323 0 425.1 467 9 4331 494.3 545 5 460 9 481 4 565 5 544.5 563 0 610 6 626 9 550 6CANADA 70 7 66 0 80 2 76 4 78 9 82 3 100.6 109 9 92 9 106 3 113 9 94.2 100 8 94 9 91 6 77 0UNITEDKINGDOM 121 146 180 214 202 220 30.0 352 444 671 82.4 892 968 1140 964OTHEREUROPE 516 267 19.4 153 123 100 121 229 256 295 38.6 707 91 1 884 868COMMONWEALTHICARIB 104 13.5 15.7 155 156 160 164 160 159 161 183 164 182 204 22.3OTHER 108 13.2 11.5 125 86 84 101 93 92 145 221 296 392 504 526 2138

HOTEL OCCUPANCYRATE(%) 44.2 41.5 53 3 58 6 60.4 51 8 57 0 61 7 56.5 59 0 62 0 58 0 60 0 60 3 57 3 61 4

AVG LENGTH OF STAY(NIGHTS) 9.9 100 97 92 9.0 98 102 10.2 103 110 109 10.9 110 110 107 na

ESTIMATED EXPENDITURE(US $ MILLION) 241 7 284 3 337 8 399.2 406 6 406 8 516 0 595 0 525 0 593 0 740 0 764.0 858 0 942 0 915 0 787.8

AVERAGE EXPENDITURE PERVISITOR(INUS$) 4451 5152 5040 5099 4819 4804 5405 573.4 5146 5098 5987 5699 5489 5828 5807 596.3

GROWTH IN STAYOVERTOURISTARRIVALS 2.8 15.1 210 66 -53 161 11.3 -122 102 17.6 05 76 77 -02 -139

/1 Based on data for Jan-Oct. 1995 onlySource Statistical Institute of Jarmaica

95

TABLE A8.1: JAMAICA - CONSUMER PRICE INDEX (ALL JAMAICA)

(January 1988 = 100)

FOOD FUEL & HOUSEHOLD PERSONALTOTAL & HOUSEHOLD HOUSING FURNISHINGS CLOTHING/ PERSONAL TRANSPORT- MISCEL-

DRINK SUPPLIES & FURNITURE ACCESSORIES EXPENSES ATION LANEOUS

AVERAGE1984 61.8 59.8 64.6 75.0 68.2 62.4 56.2 79.0 64.91985 77.9 75.0 83.3 94.2 80.7 74.7 72.9 98.2 88.31986 89.4 88.3 92.4 98.6 88.3 88.3 86.2 100.6 93.01987 95.4 94.8 96.0 102.2 98.6 97.5 93.2 100.8 95.11988 103.2 103.8 102.7 103.9 105.7 104.1 102.9 100.9 101.71989 118.0 124.3 110.7 112.3 112.1 115.0 110.4 105.5 109.61990 146.8 155.2 142.3 131.9 126.6 146.2 131.2 144.3 131.41991 217.5 138.5 228.8 176.2 177.2 195.5 205.7 200.5 192.61992 385.5 417.8 405.1 317.1 299.2 390.6 361.8 308.1 332.3

January 315.3 339.5 341.2 272.7 251.9 297.1 292.8 268.5 265.3Febuary 339.6 369.9 359.9 286.5 272.7 305.7 319.7 294.3 272.0March 355.7 388.4 378.7 294.3 279.7 339.0 337.5 300.7 276.7April 376.1 413.2 394.7 309.8 285.7 356.8 349.5 307.9 300.8May 387.0 424.8 418.8 309.6 300.5 378.0 361.9 309.9 305.9June 389.9 425.4 425.2 302.4 304.3 390.4 368.5 317.2 318.4July 399.7 431.4 427.4 323.5 303.9 405.0 372.2 316.9 341.6August 403.7 435.1 421.2 346.7 308.9 422.0 380.7 315.3 349.6September 410.2 440.8 423.7 345.1 315.6 431.3 385.9 314.5 381.2October 412.2 443.3 419.9 337.9 318.6 441.5 387.1 317.2 389.3November 417.3 449.3 425.3 338.3 323.1 455.9 389.3 317.7 394.0December 419.6 452.1 425.2 337.9 325.3 464.2 396.5 316.7 392.3

1993 470.6 506.1 454.6 362.5 368.1 514.0 458.3 383.5 452.8January 423.2 455.5 424.0 338.0 326.3 472.2 401.6 329.9 394.9February 425.2 457.0 426.8 338.2 332.5 476.5 407.3 329.1 397.0March 430.7 462.4 428.6 338.3 337.8 483.6 431.6 330.7 397.8April 435.5 464.7 430.4 346.7 343.5 488.3 436.9 333.2 420.2May 442.8 467.3 431.4 347.1 350.7 496.5 441.8 395.3 429.8June 447.8 473.7 435.4 347.1 357.5 504.9 446.5 396.3 432.6July 466.0 497.4 451.8 353.1 372.3 509.3 459.6 401.5 453.0August 481.9 517.5 465.5 367.8 379.5 521.7 469.7 408.2 461.8September 502.3 543.1 475.2 379.8 393.2 532.5 477.6 413.8 497.3October 514.6 558.8 486.1 389.0 393.5 542.6 491.3 417.8 502.5November 531.2 580.2 496.1 396.3 406.1 560.3 511.9 421.3 510.3December 546.0 595.8 504.2 408.5 423.8 580.0 523.4 424.4 536.8

96

TABLE A8.1: JAMAICA - CONSUMER PRICE INDEX (Continued)

(January 1988 = 100)

FOOD FUEL & HOUSEHOLD PERSONAL

TOTAL & HOUSEHOLD HOUSING FURNISHINGS CLOTHING/ PERSONAL TRANSPORT- MISCEL-


1994 635.7 700.4 564.8 486.3 466.6 640.4 590.5 511.7 621.6

January 558.9 607.9 514.6 420.6 434.7 589.5 531.7 451.0 554.7

February 578.0 632.5 528.4 434.7 447.8 610.0 539.9 457.7 567.2

March 590.4 649.1 542.8 439.2 460.6 617.5 549.5 459.7 572.4

April 601.6 664.5 550.3 441.6 463.6 628.1 560.7 463.0 577.8

May 616.1 685.2 558.9 444.4 469.2 633.3 577.2 468.7 581.6

June 629.8 704.4 563.7 448.1 464.1 638.2 597.8 477.6 585.5

July 650.5 724.8 573.5 527.7 475.1 643.7 603.9 481.6 595.4

August 666.4 737.1 579.9 532.5 469.3 652.3 615.0 574.5 610.5

September 673.5 741.1 584.7 532.3 471.2 661.8 622.8 575.3 653.9

October 682.5 747.3 588.8 534.0 476.1 665.4 624.9 574.7 713.5

November 687.3 752.4 593.4 538.3 484.7 669.5 628.6 577.3 719.3

December 692.8 758.5 598.6 541.7 482.3 675.8 634.4 578.7 727.7

1995 762.2 842.7 645.0 576.0 552.0 752.5 685.2 616.0 795.0

January 701.1 767.9 605.5 544.2 490.1 684.9 649.6 582.3 734.4

February 709.2 777.9 613.4 545.5 497.1 693.9 654.5 591.2 738.4

March 715.8 786.2 620.6 549.4 505.4 704.7 658.6 594.8 737.6

April 723.5 794.8 624.1 555.6 520.7 715.8 664.4 597.7 746.2

May 733.7 807.5 619.5 560.6 533.3 729.9 667.3 605.4 763.6

June 740.9 816.1 618.0 563.9 538.4 745.8 670.0 611.3 774.7

July 753.5 831.1 625.4 576.5 551.8 760.2 679.1 612.9 787.6

August 766.4 848.9 629.0 578.5 578.6 769.5 687.3 614.1 798.2

September 789.2 878.3 635.8 588.7 583.6 774.7 697.1 627.4 840.6

October 810.3 902.6 658.5 600.7 593.0 796.7 717.0 641.6 859.9

November 833.0 934.5 669.0 612.9 602.3 817.2 728.9 648.1 871.8

December 869.2 966.6 820.9 636.0 629.5 836.9 748.6 665.3 886.5


97

TABLE A8.2: JAMAICA - CONSUMER PRICE INDEX (ALL JAMAICA)

(percentage change)


TOTAL & HOUSEHOLD HOUSING FURNISHINGS CLOTHING/ PERSONAL TRANSPORT- MISCEL-


AVE RAGE1984 . .. .. .. ..

1985 26.1 25.4 28.9 25.6 18.3 19.7 29.7 24.3 36.1

1986 14.8 17.7 10.9 4.7 9.4 18.2 18.2 2.4 5.3

1987 6.7 7.4 3.9 3.7 11.7 10.4 8.1 0.2 2.3

1985 8.2 9.5 7.0 1.7 7.2 6.8 10.4 0.1 6.9

1989 14.3 19.7 7.8 8.1 6.1 10.5 7.3 4.6 7.8

1990 24.4 24.9 28.5 17.5 12.9 27.1 18.8 36.8 19.9

1991 48.2 -10.8 60.8 33.6 40.0 33.7 56.8 38.9 46.6

1992 77.3 201.6 77.1 79.9 68.8 99.8 75.9 53.6 72.5

January .. .. .. .. .. ..

Febuary 7.7 9.0 5.5 5.1 8.3 2.9 9.2 9.6 2.5

March 4.7 5.0 5.2 2.7 2.6 10.9 5.6 2.2 1.7

April 5.7 6.4 4.2 5.3 2.1 5.3 3.6 2.4 8.7

May 2.9 2.8 6.1 -0.1 5.2 5.9 3.5 0.6 1.7

June 0.7 0.1 1.5 -2.3 1.3 3.3 1.8 2.4 4.1

July 2.5 1.4 0.5 7.0 -0.1 3.7 1.0 -0.1 7.3

August 1.0 0.9 -1.5 7.2 1.6 4.2 2.3 -0.5 2.3

September 1.6 1.3 0.6 -0.5 2.2 2.2 1.4 -0.3 9.0

October 0.5 0.6 -0.9 -2.1 1.0 2.4 0.3 0.9 2.1

November 1.2 1.4 1.3 0.1 1.4 3.3 0.6 0.2 1.2

December 0.6 0.6 0.0 -0.1 0.7 1.8 1.8 -0.3 -0.4

1993 22.1 21.1 12.2 14.3 23.0 31.6 26.7 24.5 36.3

January 0.9 0.8 -0.3 0.0 0.3 1.7 1.3 4.2 0.7

February 0.5 0.3 0.7 0.1 1.9 0.9 1.4 -0.2 0.5

March 1.3 1.2 0.4 0.0 1.6 1.5 6.0 0.5 0.2

April 1.1 0.5 0.4 2.5 1.7 1.0 1.2 0.8 5.6

May 1.7 0.6 0.2 0.1 2.1 1.7 1.1 18.6 2.3

June 1.1 1.4 0.9 0.0 1.9 1.7 1.1 0.3 0.7

July 4.1 5.0 3.8 1.7 4.1 0.9 2.9 1.3 4.7

August 3.4 4.0 3.0 4.2 1.9 2.4 2.2 1.7 1.9

September 4.2 4.9 2.1 3.3 3.6 2.1 1.7 1.4 7.7

October 2.4 2.9 2.3 2.4 0.1 1.9 2.9 1.0 1.0

November 3.2 3.8 2.1 1.9 3.2 3.3 4.2 0.8 1.6

December 2.8 2.7 1.6 3.1 4.4 3.5 2.2 0.7 5.2

98

TABLE A8 2 JAMAICA - CONSUMER PRICE INDEX (Continued)

(percentage change)


TOTAL & HOUSEHOLD HOUSING FURNISHINGS CLOTH NG/ PERSONAL TRANSPORT- MISCEL-


1994 351 384 24 2 34.1 26 8 24 6 289 33.4 37 3

January 2.4 20 21 3.0 26 16 16 6.3 3.3

February 3.4 40 2.7 3.4 30 3.5 15 1.5 2 3

March 2.1 2.6 2.7 1.0 29 1.2 1 8 0.4 0.9

April 1.9 24 1.4 0.5 07 1 7 20 0.7 0.9

May 2.4 31 1.6 0.6 1 2 08 29 1.2 0.7

June 2.2 2.8 0.9 0.8 -1.1 08 36 1.9 0.7

July 3.3 2.9 1 7 17.8 2.4 09 1 0 0.8 1.7

August 2.4 1.7 1 1 0.9 -1.2 1 3 1 8 193 2.5

September 1.1 0.5 08 00 0.4 1.5 1 3 01 7.1

October 1.3 0.8 07 0.3 1.0 05 03 -0 1 9.1

November 0.7 0.7 0.8 08 1.8 0.6 0.6 05 08

December 0.8 0.8 0.9 0.6 -0.5 0.9 09 0 2 1 2

1995 199 20.3 14.2 18.5 18.3 17.5 16 0 20 4 27 9

January 1.2 1.2 1.2 0.5 1 6 1.3 24 06 09

February 1.2 1.3 1 3 02 1.4 1.3 08 1 5 05

March 09 1 1 1.2 07 1.7 1.6 0.6 06 -0 1

April 1.1 1.1 0.6 1 1 30 1.6 0.9 0.5 1 2

May 1 4 1.6 -0.7 0.9 24 20 0.4 1 3 23

June 1.0 1.1 -0.2 0.6 1.0 2 2 0.4 1.0 1 5

July 1.7 1.8 1.2 2.2 25 1 9 1.4 03 1 7

August 1.7 2 1 0.6 0.3 49 1 2 1.2 0.2 1 3

September 3.0 3.5 1.1 1.8 0.9 07 1 4 2.2 53

October 2.7 2.8 36 2.0 1.6 28 29 2.3 2.3

November 28 3.5 1.6 20 1.6 26 1.7 1 0 1.4

December 4.3 3.4 22 7 38 4.5 2.4 2 7 2 7 1.7


99

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20 a. 4/ HAITI t 2964 goo 900 Main Socondary Roads 0 Parish Capitals

BELIZE JAMAICA 1477 460 Main Ports - National Capital

-- nt5tkwuiO 69 180 4 Internationl Aiporta ParIah Boundaries

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Jamaica Achieving Macro-Stability and Removing Constraints ...documents.worldbank.org/curated/en/384231468771721658/pdf/multi0page.pdf · Report No. 1 5542-JM Jamaica Achieving Macro-Stability