Thread by @marcgayle

The IMF had their final press conference about Jamaica’s successful completion of the Precautionary Standby Agreement (PSBA).

I was invited to represent #FinanceTwitterJA

Here is my report (I got surprised, check it out below).

//Thread

Firstly, this happened 😅 (press play) — I freaked out inside to be honest.

Thank you Dr. Ramakrishnan for such kind words. I appreciate it 🙏

Dr. Uma Ramakrishnan & @K_M_Youssef fielded a number of questions and made some interesting comments.

I will refer to both of them as Uma and Karim, just for brevity purposes due to character constraints on this app. Not due to a lack of respect for them or their offices.

Key takeaways from JA’s programme?

Uma: “It is a story of the country coming together, behind these reforms, to make sure that the economic policy is sustainable and the fiscal policy is put on a path that is sustainable for the future.”

1. Ownership & Commitment across administrations through an election cycle.

2. Social consensus building - via @EPOCJA - was done in a way that “we have not seen elsewhere” has been a “huge mark of success for Jamaica’s reforms that have been undertaken”

3. How some of the difficult reforms were phased in (pension reforms, direct to indirect taxes, BOJ recapitalization).

“When there are difficult reforms to be undertaken but the govt understands that it needs to be done, one has to consider whether phasing in and lightening the load on society as a whole is a possibility”.

My Thought: This sounds like our success on this point could cause introspection about the way The Fund handles hard reforms needed for other countries and their posture generally.

They never said this, but this is just my interpretation.

Fwd looking: “Jamaica is still not out of the woods, what has happened so far is fantastic and is storybook material, but there is a lot more to be done.”

Still have to: make BOJ indep., setup fiscal council, build disaster resilience, improve governance for public bodies, etc.

Capital Market & F/X market development is needed. More data needs to be built for & from the financial sector to be able to understand fully all the developments that are happening in the financial sector.

Including on:
- Credit Reporting
- Credit Registry
- Consolidated Supervision (this came out of the FSAP Report they published - Financial Sector Assessment Programme) this would require greater coordination among the regulators.

Throughout the entire press conference, they emphasized the need for data of various types many, many times.

There is an opportunity in here for the tech community and enterprising entrepreneurs (of which I may or may not be one 😬).

Re: JMD depreciation.

Jamaica is coming from a period where the F/X is the price that everybody monitors, even more so than inflation. Given that, there is a lot more education that is needed on why the exchange rate is moving, and the benefits of a flexible exchange rate.

A lot more noise during the depreciation part of the cycle, than during the appreciation.

Swings in both directions are because JA is becoming a more dynamic economy.

JA Companies are investing out of JA and foreign companies are investing in JA. Both positive.

The policy advice has always been that the central bank should act when the market conditions are disorderly.

There is no magic definition for what is a “disorderly condition”.

Several factors may drive disorderly mkt conditions: [Sentiment shift, an underlying speculative problem, large transactions, true mismatch between supply/demand, etc.].

Collection of mkt intelligence is very important to inform policy makers about market conditions.

The F/X market is still developing.

While these swings may be disruptive to businesses in the short term, in the long term this is what we should expect from a flexible currency regime.

The key learning from this new environment is this (they repeated this MULTIPLE times)....

What is needed is mkt development.

Let people know they don’t need to fear the volatility, because there are ways to plan for it and work around it.

Specifically:
- Educate people about hedging instruments and their availability.
- Educate ppl about forward markets.

F/X swings don’t have to hurt your day-to-day business. Swings are expected with a flexible exchange rate regime.

But once the products and tools are developed, they can manage it simply.

There should be an education campaign about the benefits of a flexible exchange rate...

hedging & forward instruments, etc.

Everybody should be involved in this campaign - @CentralBankJA, @thePSOJ, everybody.

When a household is planning an overseas trip in 6 - 12 months, they should be able to (and know that they can) reserve F/X at a specific rate then.

Likewise, when a company sells goods overseas and is expecting F/X as payment in 4 months, they should be able to secure a sale for that F/X at a price they find acceptable in advance so they can plan accordingly.

Both scenarios are possible with forward contracts.

The IMF office, led by @K_M_Youssef will be operational for 2 more years primarily to continue mobilizing technical assistance and be a liaison between JA & IMF in Washington so they can provide the necessary support needed to build capacity for the continued reforms.

IMF is currently providing training to PIOJ to build capacity and specific ‘macro fiscal’ skills (eg building macro fiscal forecasting tools, debt sustainability analysis, etc.)

They stand ready and eager to provide any technical assistance JA needs in support of the reforms.

@K_M_Youssef suggested that an @EPOCJA style engagement with all stakeholders around not focusing on F/X rate, but instead focusing on tools to help insulate everybody from currency price swings (like hedging instruments, fwd contracts, etc.) would be very beneficial to JA.

Uma: STATIN needs more resources to be able to more effectively upgrade their GDP survey.

She doesn’t have any reason to believe the GDP is not correctly being measured. Would be good to upgrade survey though, but due to resource constraints it is difficult and taking longer.