The International Monetary Fund (IMF) has announced that it has reached an agreement on economic measures to be undertaken by the Jamaican authorities to gain access to an IMF Stand-By Arrangement (SBA) worth USD1.3bn.
According to Trevor Alleyne, head of the IMF mission, the Fund will soon finalize the outline of the economic program in a Letter of Intent, to be signed by the Jamaican authorities. The SBA will provide the Jamaican government a short-term loan of USD1.3bn, to be disbursed to the territory over a period of 27 months.
Commenting, Alleyne said that the SBA would not only provide the government with funding to catalyze economic growth, it will also increase the country’s access to funding from international institutions. The Jamaican government sought the IMF's assistance as the island was struggling to finance its debt, in light of one of the highest interest rates in the world – at as high as 24%.
Outlining Jamaica’s position, Alleyne stated: “Jamaica has been hard hit by the global economic crisis, in particular through a sharp decline in bauxite and alumina output, a fall in remittances and a slowdown in tourism revenues. The economy is expected to shrink by around 3.3% in 2009.”
“The program seeks to resolve the problem of an unsustainable debt position currently at over 130% of GDP and other weaknesses in the economy. Key to its success will be implementing a credible medium-term fiscal framework and a pro-active debt management strategy to put the debt-to-GDP ratio on a clear downward path.”
“This involves a coordinated set of fiscal reforms to: (i) strengthen public finances, including through new fiscal responsibility legislation; (ii) reform public enterprises and public sector employment; and (iii) make the tax structure more efficient.”
“Measures could include a mixture of controls on public sector salaries, some tax increases, as well as cuts in other spending,” he said.
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