Jamaica's New IMF Agreement to Support Growth, Create Jobs

IMF News, November 15, 2016

Source details

The International Monetary Fund approved a new $1.64 billion loan for Jamaica intended as insurance to support the country’s ongoing reform program to tackle poverty, create jobs, and improve living standards.
The authorities requested cancellation of the Extended Fund Facility (EFF), which is set to expire in April 2017, in favor of a new three-year Stand-By Arrangement (SBA).
The authorities intend to treat the new arrangement as precautionary and do envisage drawing on it only if unanticipated external shocks generate an actual balance of payments need.

Jamaica has made significant strides in restoring economic stability since May 2013 under an IMF-backed program (the EFF).
Key achievements cited:
- Inflation is at historical lows.
- Net international reserves have nearly tripled.
- Public debt has been placed on a solid downward path.

Duration: three-year Stand-By Arrangement.
Financing: the Fund’s financing commitment nearly doubles to $1.64 billion over three years.
Monitoring: shifts from quarterly to semi-annual reviews by the IMF’s Executive Board for monitoring program targets and policy implementation.
Purpose: precautionary insurance against unanticipated external shocks (examples given: a sharp increase in oil prices, global market volatility, or natural disasters) and to provide certainty of policy continuity and macroeconomic discipline.
The new program changes the measure of success from restoring stability to achieving higher growth and jobs to help reduce poverty and improve living standards.

The Economic Growth Council (led by the private sector) recommended reforms across eight areas, including:
- addressing crime,
- improving financial access and inclusion,
- reducing red tape,
- moving ahead on privatizations and public-private partnerships,
- leveraging the diaspora.
IMF-recommended policies supported by the program also include:
- improving social spending to support the poor and vulnerable,
- continuing exchange rate flexibility,
- improving the ability of monetary policy to impact the real economy,
- further reinforcing the financial sector.
Implementation support: the program will also be supported by the Inter-American Development Bank, the World Bank, and other bilateral donors.

Public debt ratio progress:
- Reduced from 145 percent of GDP (2013) to about 120 percent currently.
Fiscal objective:
- Continued fiscal discipline to reduce public debt to 60 percent of GDP by 2025/26, consistent with the 2014 Fiscal Responsibility Law.
Additional debt-reduction options under pursuit include:
- a debt-for-nature swap supported by the World Bank,
- use of government assets for debt reduction.

Poverty and social safety concerns:
- Jamaica’s poverty rate is relatively high—at around 20 percent.
- A significant share of the poor remains outside of the social safety net.
Program measures to protect and assist vulnerable groups:
- rebalance spending to increase benefits under the Program of Advancement through Health and Education (the government’s flagship conditional cash transfer program),
- expand the school feeding program,
- review the entire social safety net to improve benefits and coverage of poor households,
- implement an effective strategy for households graduating from these programs into productive employment,
- institute better monitoring and evaluation systems.

International Monetary Fund — Jamaica's New IMF Agreement to Support Growth, Create Jobs (November 15, 2016)