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  HOME | Caribbean

Jamaica's Economy to Expand 2% in 2017, Says IMF

I. BACKGROUND
1. A technical assistance mission from the IMFís Statistics Department (STA) visited
the Bank of Jamaica (BOJ), Kingston, Jamaica during November 28ĖDecember 9, 2016. The
purpose of the mission was to follow up on the flow of funds (FOF) statistics mission of
August 2015. The FOF project covers both transactions and balance sheet data. The mission
was funded by the Caribbean Regional Technical Assistance Centre (CARTAC).
2. There is a strong need for the FOF in Jamaica. The FOF provide a fully integrated
framework, linking positions with transactions in financial instruments and between the real
and financial parts of the economy, to show the inter-linkages within and between the
financial and nonfinancial sectors of the economy. Moreover, through this structure, the
statistics can highlight where data problems arise. In this manner, a consistent set of data is
provided, using common definitions and classifications. The FOF is an integral part of the
System of National Accounts 2008 (2008 SNA). These features of the FOF assist in
macroeconomic analysis and policy and highlight where problems of financial instability
might arise (from within as well as from outside the financial sector).
3. The BOJ decided to launch an FOF project in 2015 and asked STA to provide
assistance in setting up the project. In August 2015, STA conducted a technical assistance
mission to the BOJ to that end. A detailed action plan was agreed between the mission and
the BOJ to begin assembling a preliminary set of balance sheet data from existing data
sources for various sectors of the economy. These were the financial sector (and subsectors),
general government, public nonfinancial enterprises, and the rest of the world. Using these
existing datasets to create a preliminary set of sector tables (by instrument and counterparty),
the BOJ could determine what information was available and where the gaps were. The
August 2015 missionís action plan also set out some of the areas where new and/or improved
data sources needed to be developed. The current missionís purpose was to examine progress
on both these fronts and to make further recommendations, within a revised action plan.
II. MISSION FINDINGS
4. The mission found that considerable progress has been made by the BOJ in
constructing sector tables and the FOF matrix for positions data from March 2013 to March
2015. Many of the action planís main recommendations have been completed or are on track
for completion.
A. Bank of Jamaica
5. The BOJ has completed all four of the benchmark actions set out in the August 2015
mission report, that is: (i) the establishment of an inter-agency working party to coordinate
data supply, monitor progress, and ensure consistency in classification and data sharing
between agencies; (ii) the establishment of a team for the FOF (though these staff are not
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solely dedicated to the FOF project); (iii) the preparation of preliminary financial balance
sheets for the financial sector and general government from existing datasets, on a fromwhom-to-whom
basis, for the most part; and (iv) the use of data from the FSC to complete
the FOF instrument detail for the part of the financial sector that the FSC regulates. The
August 2015 mission report had recommended the adoption of a standardized report form for
these industries but the BOJ has found that that was not necessary for the FOF. However, the
new report for the FSC to use for pension funds is still being developed. The BOJ has
submitted its request and the FSC has indicated that it will finalize the form in early 2017.
6. Most of the financial sectorís financial balance sheet positions has been completed,
together with the rest of the world and general government. Data on the financial balance
sheet position for the nonfinancial corporationsí sector are still largely incomplete but this
was expected as this is the most difficult sector for which to compile data. Data for the
household sector (which, in Jamaica, includes nonprofit institutions serving households) have
been compiled from counterpart information in the financial sector. This approach is usual
for FOF compilation as surveying households directly is usually not possible, as it is a very
expensive, and not very reliable, way to obtain the data.
7. Data for the central bank and other deposit-taking corporations are drawn from the
datasets that feed into the 1SR and 2SR for the central bank and other deposit-taking
corporations, respectively, with most instruments having counterpart sector detail. These data
are collected by the BOJ as input to its monetary policy. These are high quality data.
However, it would assist the FOF project if these data were fully entered on the 1SR and
2SR. At present, some detail is missing from the 1SR and 2SR, requiring the FOF team to
obtain the data from the actual submissions of these datasets.
8. Credit unions are not currently regulated but it is expected that the BOJ will take over
that responsibility formally in the not-too-distant future. However, the BOJís Supervision
Department is already obtaining the balance sheets of credit unions on a regular basis. As a
result of this access, the FOF has been able to include data on these institutional units. They
are, at present, included with other financial institutions, but, should the BOJ Monetary
Policy Committee decide to include their liabilities as part of the monetary aggregates, they
should be treated as part of the deposit-taking corporations subsector.
B. Financial Services Commission
9. For most of the nonbank financial institutions, the Financial Services Commission
(FSC) collects data as part of its remit as regulator of insurance companies, pension funds
investment dealers and security brokers, and unit trusts (investment funds), investment and
pension fund managers. The FSC submits quarterly data to the BOJ on a timely basis. The
data are of good quality, for the most part, though the pension funds data need to be
improved.
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10. The mission, together with the BOJ, held discussions with the FSC. The purpose of
the meeting was to determine what reporting problems the FSC may have in obtaining the
balance sheet data for onward submission to the BOJ for the FOF project. The FSC has been
very cooperative with the BOJ in providing input for the project.
11. The meeting discussed the need for a new report form for pension funds. The FSC are
in the process of finalizing a new report form for 2017. The BOJ has submitted a draft
proposal to meet its needs (based on Annex III of the August 2015 mission report). The FSC
indicated that it would incorporate most of these data needs for the quarterly return.
12. The meeting also discussed how any under or over-funded is reported for defined
benefit schemes. The FSC stated that most of the funds were fully funded. However, in the
event of a shortfall or surplus, it was not clear to the mission whether any such shortfall
(surplus) would be recorded as a claim of the pension fund (sponsor) on its sponsor (pension
fund). The FSC indicated that it would explore the issue and advise the BOJ, accordingly.
13. Pension funds are appraised every three years to determine whether or not they are
under or over-funded. In the event that they are under-funded, the sponsor is given a certain
period of time to make up the shortfall. It is this shortfall that needs to be recognized on
balance sheet if it is still outstanding on the balance sheet date. Similarly, where a pension
fund is over-funded, the sponsor is entitled to a contributions holiday, that is, it is not
required to make further contributions until such time that future liabilities to the current and
former staff have been reached. In both situations, it would be helpful for the FOF project to
be informed of the amount of the actuarial reassessments and the reasons therefor: changes in
the discount rate, demographic changes, changes in the terms of employment, etc.
14. The meeting was advised that, for some of the insurance companies, there is a
problem with timeliness of quarterly data. The mission advised the FSC that, for statistical
purposes, it is acceptable to provide preliminary data and to submit revised data later.
15. The FSC informed the meeting that some of the smaller investment brokers and
security dealers do not provide the information on a quarterly basis. The FSC noted that the
larger brokers and dealers, that report regularly, account for approximately 90 percent of the
industryís assets. Under those circumstances, it is possible for the BOJ to gross up the results,
provided they know what the universe figure is and whether those reporting are the same
units every period. Where they are not the same, the BOJ will need to be advised in order to
make estimates for those missing entities.
16. Because the current report forms are industry specific, there are considerable
differences in what information is provided. The mission suggested that the BOJ provide the
next meeting of the inter-agency working group with a mapping of instruments in the FSCís
forms to those in the FOF (2008 SNA) framework. The FSC also requested that the BOJ
provide the classifications by sector and instrument so that the FSC can ensure there is
consistency in reporting both within and across the industries that it regulates.
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17. The meeting also discussed the mechanism for the FSC to submit the data to the BOJ.
Because data for individual enterprises are submitted, the mission advised the FSC and the
BOJ that a secure site is needed to ensure no loss of confidentiality.
C. Tax Administration Jamaica
18. The mission, together with the BOJ, met the TAJ to discuss two related issues: (i) the
memorandum of understanding (MOU) between the BOJ and the TAJ; and (ii) how to obtain
data on selected balance sheet items of nonfinancial corporations.
19. The purpose of the MOU is to permit staff at the BOJ access to individual corporate
taxpayer files, as well as to develop means to obtain aggregated data. The MOU has been
under discussion between the two organizations for some time. It has been reviewed within
the BOJ by the data requesting divisions as well as the legal department. A proposal is due to
be submitted to the TAJ in early 2017. It will then be reviewed by the TAJ, and once both
parties are satisfied that their needs and concerns are met, it will be submitted to the
Governor and the Minister for their signatures.
20. While it is necessary for the MOU to be signed for any delivery of tax individual data
files by the TAJ to the BOJ, in the meantime, the two agencies can explore how to obtain
selected balance sheet data of nonfinancial corporations. The TAJ expressed its willingness
to provide as much information as it can. Should the MOU not be signed by March 2018,
TAJ should be able to provide the data in aggregate, until such time that the MOU is signed.
21. The information being sought for the FOF is for those balance sheet items for which
there is no alternative source. These are shown in this reportís annex. If it were possible for
the TAJ to provide the BOJ with these data, even though they might only be available with a
long lag (of more than one year), they would provide the latter with a benchmark level from
which to make estimates for current periods for both positions and transactions. When more
current data are provided, those estimates could be revised.
22. At present, it may not be possible to provide any balance sheet data on an aggregated
basis as the tax files are not machine-readable. It might be possible for these files to be read
into other software that would allow them to be machine-readable: such an option would
need to be explored. However, even if such an option were available, it might not provide
useful information as many small corporate entities do not file balance sheets.
23. In light of the absence of many small corporate tax filersí balance sheets, the TAJ
suggested that the FOF needs be included in tax schedules and indicated that the information
would also be useful for the TAJís own assessment processes. Tax schedules are required
and therefore any corporation that did not provide the schedule would be in violation of the
law. The TAJ advised the mission and the BOJ that it would be necessary for the BOJ to
provide the request before the end of December 2016 for it to be considered for inclusion in
the 2017 tax year filing requirements. The mission provided the BOJ with the required items
17
(see this reportís annex). If the end-December 2016 deadline is missed, it is probable that this
request will not be actioned by the TAJ until a year later. The information set out in the
annex is maximalist: if the TAJ finds that too much information is being requested, it is
possible that the request could be pared back, but there would, consequently, be a loss of data
quality for the FOF.
D. Ministry of Finance and the Public Sector
24. The mission, together with the BOJ, met the Ministry of Finance and the Public
Sector (MOFPS). The meeting was to discuss the provision of data on Government of
Jamaicaís (GOJ) balance sheets and transactions, and to explore with the MOFPS how it can
assist the BOJ in obtaining balance sheet data of public entities.
25. The FOF project currently obtains data on GOJís domestic debt securities from the
MOFPSís website. It also uses data on foreign loans and debt securities issued abroad from
the international investment position (IIP) that the BOJ compiles. Transactions data are also
available.
26. The information on GOJ debt securities outstanding is, however, at nominal value,
not at market price. The MOFPS, however, indicated that market prices could be calculated
as all the relevant data Ė in addition to nominal value, the term to maturity, the coupon rate,
the current market interest rate Ė are available. The MOFPS indicated that it would explore
providing the balance sheet information at market prices.
27. The meeting also explored how other items on the GOJís balance sheet could be
provided to the FOF project. The MOFPS noted that accounts receivable/payable are
calculated every month. The MOFPS said that these data would be provided to the BOJ
within a few days of the meeting as the information is readily available.
28. The meeting also explored whether the pension liabilities to current and former GOJ
employees is estimated by the MOFPS. The MOFPS indicated that the future cash flows are
estimated and these could be provided to the BOJ for the FOF project. It was agreed that
these data may be used internally by the BOJ until such time that agreement is reached
between the MOFPS and the BOJ on how to publish the data.
29. The mission noted that future cash flows would need to be discounted to obtain a
present value but the rate of discount was not discussed. This is a matter that data users at the
BOJ may wish to provide guidance. The mission proposed that the long-term GOJ Jamaican
dollar bond rate could be used.
30. It was also noted that it would be very helpful for the FOF project if the MOFPS
could indicate what might be causes of any changes in the estimation of future cash flows,
such as changes in the actuarial assumptions, or terms and conditions of employment, etc.
Such changes may need to be recorded in the other changes account, rather than as
18
transactions, depending on the cause of the change.
31. As to the BOJís obtaining balance sheet data for the major public entities, it was
noted that, at present, 8 of the 16 major entities are reporting to the BOJ quarterly, while 8
entities provide only annual data. The MOFPS indicated that it would seek to ensure that the
remaining 8 entities reported quarterly.
32. The BOJ also asked whether it might also be possible to have a standardized report
form. The present use of these entitiesí balance sheets is less than optimal as they do not have
the same information detail, many of the balance sheet items are highly aggregated, and no
notes to the financial statements are provided. The MOFPS indicated that it would explore
how to provide the information the BOJ needs.
E. Statistical Institute of Jamaica
33. The mission, together with the BOJ, visited STATIN to discuss two matters: the
development of sector accounts for the production account through the capital account, and
STATINís assistance in the conducting of a survey of nonfinancial private corporations.
34. STATIN advised the mission that it is severely resource-constrained at present and
that developing sector accounts from the production account to the capital account would not
be possible until 2018, at the earliest, for the financial and general government sectors. For
the nonfinancial corporationsí sector and households (and non-profit institutions serving
households), it would be a further two years before the current and capital accounts would be
available (and possibly later). Both of these possible target dates are predicated on STATIN
receiving additional resources. If those resources are not available, STATIN would be unable
to provide these sector accounts. Should they be able to do so, they would expect to be able
to provide the data back to 2014, but only on an annual basis.
35. For much the same reason, STATIN indicated that it cannot conduct a survey of the
balance sheets of the largest nonfinancial corporations in the foreseeable future. The meeting
discussed alternative approaches, such as the BOJís conducting a survey of these enterprises
but STATIN cautioned that they are facing declining response rates, even from this group.
F. Other Data Sources
36. The only other current source of external data to the BOJ is the Jamaica Stock
Exchange (JSE) website. The JSE posts on its website of the financial statements of the
enterprises it has listed. The BOJ uses the balance sheet information of the largest of these
enterprises. The JSE also provides the BOJ with data on the price and number of shares on
issue of each of the enterprises it lists. These data are used by the BOJ to derive the market
value for these listed enterprises.
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III. TRAINING, STAFFING, OUTREACH, AND COMPUTER RESOURCES
37. The mission made presentations on the uses of the FOF to staff from within the BOJ
and from external data providers. The sessions were well attended and there were a number
of questions from the Financial Stability Department of the BOJ, who are likely to be one of
the major users of the data. The mission strongly recommended to the BOJ that the FOF staff
involve the Financial Stability Department on an ongoing basis about the development of the
project and how to understand them.
38. The mission also provided two days of training to the FOF staff and others with a role
in providing data for the project from within the BOJ. Many of the staff are new and would
benefit considerably from formal training. The mission was advised that one of the FOF staff
had applied for the newly offered course by the IMFís Institute and Capacity Department for
February/March 2017.
39. There is a need for the BOJ to begin an outreach program with potential users, both
within and outside the BOJ. By involving potential users at an early date of development,
usersí needs can be incorporated into the datasets. Moreover, such an outreach program can
advise such users on how to understand the data and their interlinkages.
40. The mission strongly recommended that the current staff resources for the project be
increased. At present, there are two staff who compile the datasets, coupled with a
supervisor. However, all the staff involved in the FOF project have many other
responsibilities, most of which are for current data production (such as the IIP and external
financial flows, external debt data, the reserves template), which means that the needs for
these datasets take priority. A group dedicated solely to the FOF project will mean the
program can advance much more quickly. The development of a new project requires more
resources than one that has been in production for some time, given the same data needs.
41. The mission also strongly recommended that the BOJ develop a database for the FOF
datasets. While Excel will be sufficient for the early development of the project, once it has
become an ongoing exercise, a proper database will be necessary, given the size of the
datasets involved in an FOF system.

Jamaica - IMF Report - April 2017 by Latin American Herald Tribune on Scribd


 

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