IMF says Jamaica should speed up reconstruction, could cut debt faster

The International Monetary Fund (IMF) has said Jamaica should accelerate reconstruction following Hurricane Melissa and could reduce its debt faster once the recovery takes hold.

“The priority now is to advance reconstruction while preserving macroeconomic stability and deepening reforms, considering the more challenging external environment,” said IMF mission chief W. Raphael Lam in a statement released on Wednesday.

“Delays in both reconstruction and restoration of tourism capacity would also weaken the recovery,” the IMF warned, adding that “risks to the growth outlook are tilted to the downside, while inflation risks remain on the upside”.

The statement contains preliminary findings from the team's visit to Kingston, which ran from October 27 to November 4.

Easing the fiscal stance after the hurricane was the right decision, according to the fund.

Still, “efforts are needed to accelerate reconstruction and build back better by closing long-standing infrastructure gaps and strengthening resilience to future natural disasters”.

The new National Reconstruction and Resilience Authority (NaRRA) received a welcome, but qualified, endorsement.

“Work should continue in enhancing procurement, contract management, public investment management, and interagency coordination to address implementation bottlenecks,” the statement said.

Once the recovery gathers pace, the focus should shift.

“As reconstruction advances and the output gap closes, fiscal efforts need to shift toward rebuilding buffers,” the statement said.

Public debt reached about 66 per cent of gross domestic product (GDP) in 2025/26.

The Government expects it to fall to about 60 per cent by 2031/32, but “a faster consolidation path could be considered to reduce debt sooner and reinforce policy credibility while containing financing costs,” the fund said.

Achieving this will depend on “revenue mobilisation and restraint in current spending growth”, which the statement describes as “critical to preserve fiscal space for priority investment and return public debt to a sustained downward path”.

“Containing non-priority recurrent spending remains essential,” it added.

Growth of 1.3 per cent is projected for this fiscal year, following a contraction of 1.2 per cent in 2025/26, with output expected to return to its pre-hurricane level by mid-2027.

Inflation, driven by higher energy and food prices, is above the Bank of Jamaica's (BOJ) target range of four to six per cent and is expected to return to that range by mid-2027.

The BOJ's September rate increase was appropriate, the fund said, adding that “monetary policy should be appropriately tight, especially given persistent price shocks”.

On fuel, the price-smoothing mechanism must “continue to operate symmetrically to ensure cost recovery over time,” the statement said.

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