Jamaica Gets New $1.7 Billion IMF Agreement After Slashing Debtby
Jamaican officials pledge continued fiscal discipline
Carribean economy has one of the world’s highest debt levels
Jamaica and the International Monetary Fund reached an agreement to make $1.7 billion in funding available over the next three years as the government seeks to further cut one of the world’s highest debt loads while jump-starting a sluggish economy.
The stand-by agreement, announced Thursday, would make $430 million available immediately after the IMF board approves it next month. It replaces a four-year IMF loan that Jamaica took on after it restructured debt in 2013.
Prime Minister Andrew Holness said that the government has ample foreign reserves and plans to treat the new agreement as “an insurance ...plans to treat the new agreement as “an insurance policy against unforeseen economic shocks” such as natural disaster and commodity price drops. “Our request to move to a precautionary arrangement is a sign of strength and reflects the policy credibility and strong macroeconomic management of the Jamaican government,” he said.
Adhering to strict austerity measures that the IMF set as conditions to the previous program, including maintaining a primary budget surplus equal to 7 percent of gross domestic product, Jamaica will cut its debt to about 120 percent of GDP this year from a peak of 145 percent in 2012. The government has set a goal of boosting the growth rate of Jamaica’s $14 billion economy to 5 percent within four years, a rate that it has not achieved since the 1980s.
“Jamaica has made commendable progress in its economic adjustment program over the past three and a half years,” said Alejandro Werner, IMF’s director for the Western Hemisphere. “Macroeconomic stability is becoming entrenched as evidenced by low inflation, the buildup of foreign currency reserves, and a decline in the current account deficit.”