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IMF pact - Fund agrees in principle to Jamaica's loan request

Published:Friday | January 15, 2010 | 12:00 AM

Arthur Hall, Senior Staff Reporter

The International Monetary Fund (IMF) has, in principle, approved Jamaica's request for a US$1.3-billion standby agreement.

However, the deal will still need the stamp of approval of the executive board of the fund before Jamaica begins to draw down on the money.

Dominique Strauss-Kahn, managing director of the fund, yesterday announced the: "IMF staff and the Jamaican authorities (have) reached agreement, subject to final approval by the IMF executive board, on an economic programme, supported by an approximately US$1.25-billion loan under a 27-month standby arrangement."

According to Strauss-Kahn, the programme could go to the executive board for approval in the next few weeks, pending some prior actions to be taken by the Jamaican Government.

While he provided no details of the action that the Jamaican Government will have to take before the final approval, it was clear that the IMF managing director was referring to the Jamaica Debt Exchange (JDX) launched yesterday.

Under the JDX, financial institutions have until January 26 to sign off on the scheme - one day before the IMF board meets to decide on Jamaica's application.

The JDX transactions, which cover a swap of domestic debt for lower priced bonds with extended maturity dates, are to be completed by February 16.

Strauss-Kahn noted that approval of the standby arrangement is expected to catalyse about US$1.1 billion in funding for Jamaica from other international financial institutions.

"By streamlining public expenditure and reducing interest payments, Jamaica will have more resources available for investments in education and infrastructure. This will increase growth potential, reduce the vulnerability to external shocks, and put the country in a position to reap the benefits of a recovery in global growth," said Strauss-Kahn, adding that he was confident in the administration's ability and commitment to implement the policies.

The IMF boss repeated claims by Prime Minister Bruce Golding that the Government's medium-term economic programme would include additional protection for the poor.

According to Strauss-Kahn, the programme allows for at least a 25 per cent expansion of the social safety-net spending.

The Programme of Advancement Through Health and Education and the school-feeding programme were expected to be expanded to about 360,000 persons from the current 325,000.

See more on the JDX on A3 and in your Financial Gleaner.