IMF and Jamaica Reach Agreement on US$1.3 Billion Loan

KINGSTON, Jamaica – Mr. Trevor Alleyne, chief of an International Monetary Fund (IMF) mission to Jamaica, issued the following statement today in Kingston:

“The Jamaican authorities and an IMF staff mission have reached agreement on the key elements of a program that the IMF would support with a loan under a Stand-By Arrangement (SBA). We will remain in close contact with the authorities over the coming days as they finalize their economic program in a Letter of Intent, which would then be reviewed by IMF management. The current timetable envisages that the IMF’s Executive Board would consider Jamaica’s SBA early in the new year. The SBA under discussion is for a SDR 802.5 million (about US$1.3 billion) over 27 months.

“The program’s main goal is to address the country’s economic imbalances and put Jamaica on a path of sustainable growth. The program with the IMF is also expected to catalyze significant additional financing from other international institutions.

“Jamaica has been hard hit by the global economic crisis, in particular through a sharp decline in bauxite and alumina output, a fall in remittances and a slowdown in tourism revenues. The economy is expected to shrink by around 3.3 percent in 2009.

“The program seeks to resolve the problem of an unsustainable debt position currently at over 130 percent of GDP and other weaknesses in the economy. Key to its success will be implementing a credible medium-term fiscal framework and a pro-active debt management strategy to put the debt-to-GDP ratio on a clear downward path.

“This involves a coordinated set of fiscal reforms to: (i) strengthen public finances, including through new fiscal responsibility legislation; (ii) reform public enterprises and public sector employment; and (iii) make the tax structure more efficient.

“Measures could include a mixture of controls on public sector salaries, some tax increases, as well as cuts in other spending.

“At the same time, the program allows for an increase in social safety net spending to protect the most vulnerable, in particular a 50 percent rise in the budget of the PATH (Program of Advancement through Health and Education) cash transfer and the school feeding programs. In addition, General Consumption Tax (GCT) exemptions on rice and counter flour will be maintained.

“Additional reforms are envisaged to strengthen the resilience of the financial sector.”

Jamaica, which became a member of the IMF on February 21, 1963, has a current IMF quota of SDR273.50 million (about US$ 434 million).

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