Above: Kingston (CJ Photo)
By Alexander Britell
The International Monetary Fund’s Executive Board has approved a $932.3 million Extended Fund Facility arrangement for Jamaica, it announced Wednesday.
The four-year EFF represents the equivalent of 225 percent of Jamaica’s quota in the IMF. It represents a slightly smaller amount than the $958 million initially projected, but far more than $750 million mentioned in Jamaica’s staff-level agreement with the IMF, a deal first reached in February.
The Executive Board approval provides for an initial disbursement of $207.2 million.
“The main objective of the program is to put public debt on a firmly downward trajectory and thereby create a virtuous cycle of debt sustainability and higher economic growth,” said David Lipton, first deputy managing director and acting chair of the Executive Board. “The authorities’ multi-layered reform agenda comprises ambitious fiscal consolidation, improvement in competitiveness, debt reduction, and improved social protection programs.”
The financing arrangement forms a part of a $2 billion package from Jamaica’s multilateral partners including the World Bank and the Inter-American Development Bank. Both of those agencies have allocated $10 million over the next four years.
“For most of the past three decades, Jamaica has suffered from very low growth, high public debt, and serious social challenges — key factors behind these problems have been Jamaica’s unsustainable debt burden, low competitiveness, a weak business climate, and lack of policy credibility,” Lipton. “During 2012/13, the authorities started to tighten fiscal policy and prepared a comprehensive four-year economic reform program to address these challenges.”
The fund said that achieving higher and sustained growth was “key to increase the welfare of Jamaicans and ensure the country’s long-term macroeconomic stability.”
“While the full benefits of the reform agenda may take time to materialize, the reforms are urgently needed to ensure a more prosperous future for Jamaica,” he said. “To enhance sustainability of the reform agenda, fair burden sharing of the reform effort is essential. A central component of the program is the authorities’ package of measures to promote social coherence that includes a floor on social spending, an improved social safety net, and programs to increase employment.”
The deal comes 17 months since Portia Simpson Miller’s People’s National Party won the country’s 2011 national elections, vowing to complete a deal with the fund in short order.
“The authorities recognize that safeguarding the financial sector is also critical – they have established a Financial Sector Support Fund to offer assistance, if needed, to financial institutions participating in the recent debt exchange,” Lipton said. “Although the risks to the program are high, the implementation of the prior actions, the front-loaded nature of the reform agenda, and the envisaged collaboration with development partners should help foster the successful implementation of the program.”