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IMF rep says JDX still having positive effects - Avoids current negotiations

Published:Friday | November 16, 2012 | 12:00 AM
Dr Gene Leon, senior resident representative of the International Monetary Fund. - File

Jamaica continues to benefit from the gains of cutting its interest payments arising from the Jamaica Debt Exchange (JDX), said Dr Gene Leon, senior resident representative of the International Monetary Fund (IMF).

The debt swap of J$702 million worth of domestic bonds was executed in February 2010.

"In fact, JDX is still having an impact now because rates went down and people presumably got lower loans because of the reduction of rates and they are still seeing the benefits today," said Leon, at a breakfast forum on Thursday.

He said, however, that he would refrain from publicly grading the impact of the JDX.

Leon addressed experts at a First Global Financial Services breakfast forum in Kingston. His speech focused on the need for pension reform within the Caribbean, but it was a question from Vincent Morrison, president of the National Workers Union, that sparked comments on the JDX.

The JDX, which occurred as a precursor to the IMF agreement in 2010, extended maturities, reduced coupon rates and reduced government interest payments. Leon said that all key objectives on the Government's side were surpassed but that the swap affected the private sector and citizens in varying ways.

absolute success

"There were pluses and minuses; there was a reduction in investment income, (but) there was an improvement of matching assets and liabilities, and interest rates went down in general," the IMF rep said.

He said key targets of 80 per cent participation and the reduction of debt relative to GDP were surpassed.

"So to the extent that the 3 per cent of GDP became 3.5 per cent and the 80 per cent became 99.2 per cent and some US$300 million saved, all of that would contribute automatically to what one would call - relative to the objectives - an absolute success."

Jamaica expects to sign a new IMF agreement within months.

In fact, Leon sidestepped an IMF query from audience member Omar Azan, past president of the Jamaica Manufacturers' Association, on whether a deal is in sight.

"There is no hold up and today we are talking about pension reform," responded Leon, who earlier said that his host requested that he avoid discussing the pending IMF deal.

Leon argued in his presentation that the JDX and IMF agreement in 2010 created the backdrop for pension reform which provided better matching of assets and liabilities.

The Caribbean's pension funds, he argued, were vulnerable to a growing youth population, which in 40 years would become pensionable and place a strain on Government's or the private sector's ability to sustain payments.

"Adverse demographics, though not an immediate problem amongst Caribbean countries, will become a significant issue in a few decades; and the current systems in the Caribbean are not as efficient as they could be and incur considerable fiscal costs," he said.

"The need for pension reform varies across countries. There is, therefore, no one size fits all ... but what is needed is a framework to undertake a critical assessment of its system, ensuring that the total costs, both direct and indirect, and the benefits of the reform are appropriately evaluated."

He said that best practice of pension reform focuses on protecting the elderly from poverty while sustaining fiscal sustainability.