IMF Reaches Staff-Level Agreement with Jamaica on Three-Year Precautionary Stand-By Arrangement

IMF News, October 13, 2016

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Authors: Arrangement Press Release No.
Published: October 13, 2016

Mission and agreement overview

An IMF mission led by Uma Ramakrishnan visited Kingston during September 21–30, 2016, to conduct discussions on a new IMF-supported economic program with Jamaica.
Staff-level agreement was reached on a new economic program for Jamaica that would be supported by a 36-month Stand-By Arrangement (SBA).
The precautionary SBA is intended as an insurance against unforeseen economic shocks that are beyond the control of Jamaica.

Financing and access

The SBA would have access of SDR 1.2 billion (equivalent to 312 percent of quota or about US$1.7 billion).
If approved by the IMF’s Executive Board, SDR300 million (about US$430 million) would be immediately available.
The Jamaican authorities indicated their intention to treat the SBA as precautionary given the Bank of Jamaica’s comfortable foreign reserves position.

Economic context and recent performance

Jamaica has made commendable progress in its economic adjustment program over the past three and a half years under the existing IMF-supported program (see Press Release No. 13/150).
Fiscal discipline and proactive debt management have helped reduce public debt by more than 25 percent of GDP since the start of the arrangement under the Extended Fund Facility (EFF).
Macroeconomic stability is becoming entrenched as evidenced by:
- low inflation,
- the buildup of foreign currency reserves,
- a decline in the current account deficit.
Important reforms are being undertaken to unlock Jamaica’s growth potential.

Program objectives and policy priorities

The new program is aimed at:
- sustaining macroeconomic stability,
- boosting employment,
- raising the living standards of the Jamaican people,
- progressively reducing a poverty level that remains too high.
The government’s goals—which the IMF staff team will recommend that the IMF’s Management and Executive Board support—are to:

(i) re-orient public resource allocation toward infrastructure, social protection, and security-related spending, while transforming the public sector to be more efficient and delivery-focused; (ii) modernize the monetary policy framework and build the foundation for an eventual move to inflation targeting; (iii) bolster the resilience of the financial system; and (iv) work with the Economic Growth Council to implement initiatives that unlock Jamaica’s growth potential and promote private sector jobs.

Process and next steps

The Jamaican government’s request for IMF support is tentatively scheduled for consideration by the Executive Board in November, at which point the arrangement under the EFF would be replaced with the precautionary SBA.
The IMF staff team and the Jamaican authorities look forward to a continued productive collaboration as the Government of Jamaica implements its ambitious reform program.

IMF Press Release No. 16/459, October 13, 2016