The International Monetary Fund revealed yesterday that it was set to lend the Caribbean nation $958m over a 48-month period under its Extended Fund Facility. This will be supported by $510m each from the World Bank and Inter-American Development Bank.
The IMF loan is $200m more than agreed with the Jamaican authorities in February, when the economic reforms required of the country in return for the bailout were finalised.
These include a debt restructuring plan aimed at reducing the amount owed by Jamaica from 140% of gross domestic product to 95% by 2020. Under the National Debt Exchange Offer, which was launched in February, domestic holders of $860bn worth of high-interest government bonds are being asked to swap them for lower interest options.
Jan Kees Martijn, head of the IMF mission to Jamaica, said Jamaica’s ‘unsustainable’ debt burden had undermined confidence in its economy and increased risks to its stability, as well as limiting the government’s potential to provide services to its population.
The debt restructuring would help to reduce the country’s medium-term financing needs and help to make its debt sustainable, but would depend on a high rate of participation from private bond holders, he noted.
‘The main objective of Jamaica’s economic reform programme is to contain the country’s rising economic and external vulnerabilities and address economic imbalances, while putting Jamaica on a path of sustainable growth,’ he explained.
‘The programme also aims to promote macroeconomic and financial stability, including through achieving and sustaining higher primary fiscal surpluses that can help underpin debt sustainability, pave the way for private-sector led growth through the implementation of a comprehensive set of structural reforms, and promote social stability through enhanced social protection for the most vulnerable,’ he added.
Under the programme, Jamaica will also carry out comprehensive tax reforms, rationalise its spending and improve its public debt and public financial management. It will also improve oversight and regulation of its financial sector and increase the competitiveness of its economy.
In a joint statement, the IDB and World Bank added: ‘The IDB and the World Bank share the high priority assigned by the government to restoring macroeconomic stability and recognise the significant steps already taken to achieve this. The two multilateral institutions stand ready to accompany the government’s efforts to bring about sustained growth to the benefit of all its citizens.‘
The loans have still to be agreed formally by the boards of the three banks. The IMF board is expected to approve its contribution later this month.
