IMF Urges BOJ to Reduce Foreign Exchange Controls

Amid signs of resilience in Jamaica’s monetary system, the International Monetary Fund, IMF, says there’s greater scope for the Bank of Jamaica, BOJ, to reduce the country’s foreign exchange controls.

The Fund is calling for a gradual reduction in surrender requirements and a scale-back of the Central Bank’s foreign exchange interventions.

The recommendation comes as part of the IMF’s latest review of the country’s economic performance and policy direction.

Mahiri Stewart tells us more.

The International Monetary Fund conducted its assessment of the country’s fiscal and monetary performance earlier this month.

Its report released on Thursday noted that Jamaica’s foreign exchange or FX market, while stable, has room for deepening.

This, the Fund says is an important step toward improving market efficiency and enhancing monetary transmission.

The IMF says Jamaica’s inflation-targeting regime, underpinned by strong international reserves and a stable exchange rate, has served the country well.

However, it emphasized that there is scope to further liberalize the FX market, thereby allowing market forces to play a greater role while ensuring continued stability.

The Fund is calling for a gradual reduction in surrender requirements and more limited interventions in the foreign exchange market by the central bank.

A surrender requirement is an obligation for individuals or businesses to sell a specific percentage of their foreign currency earnings to the central bank.

This is typically implemented to manage the foreign exchange market, control inflation, and increase the central bank’s foreign currency reserves.

While backing the BOJ’s data-driven and cautious approach to monetary policy, IMF staff acknowledged that there may be room for further liberalisation.

However, it also concluded that global uncertainties, including inflation risks and geopolitical instability, necessitate a prudent and measured stance.

Beyond the FX market, the IMF also applauded Jamaica’s broader financial sector reforms.

The review also highlighted Jamaica’s progress on anti-money laundering and financial transparency.

The fund commended the country for having exited the Financial Action Task Force’s Grey list in June 2024.