Jamaica Secures Policy-Based Loans from IDB

The Government of Jamaica and the Inter-American Development Bank (IDB) have signed a contract for three policy-based loans totalling $15.2 billion (US$170 million).
Minister of Finance and Public Service, Hon. Audley Shaw signed on behalf of the government, while IDB Country Representative, Mr. Gerard Johnson affixed his signature on behalf of his organisation, at the signing ceremony held on Thursday (February 18) at the Finance Ministry in Kingston.
Minister Shaw informed that the US$170 million represented the first tranche of a US$600 million loan to be handed over in three stages by the end of the year. He said the loans will mature in 20 years and are payable in semiannual consecutive equal installments with a grace period of five years and six months from the date of signing.
The loans are repayable at an interest rate of 1.32 per cent.
“The loans are to provide financial support for institutional and policy changes relevant to the government’s reform programmes,” Mr. Shaw informed.
He said the first loan of US$50 million will go towards the Human Capital and Protection Programme, which will “help preserve recent gains in poverty reduction and reduce vulnerability of the poor during a time of economic downturn.”
The programme specifically aims to protect basic health, education and safety net spending during the economic downturn and to improve the effectiveness of reforms to important social safety net programmes.
The second loan of US$60 million will go towards the Competitiveness Enhancement Programme II, which addresses key constraints to the competitiveness of Jamaica, by promoting the implementation of reforms to reduce the cost of doing business, in addition to the requirements for a macroeconomic framework congruent with the programme’s objectives.
The programme structure, according to the Finance Minister, is divided into four major reform areas that include the competitiveness implementation framework, tax and expenditure reform, improving access to finance and financial market development and reduction of business costs through expedited land titling.
“This would include the whole tax reform programme that is taking place. The IDB, among other things, has also financed a tax expenditure study, the results of which are shortly to be presented to me and which will help to guide the whole process of reforming the incentive regime and the programme of tax waivers,” Mr. Shaw said.
He added: “It also includes the Credit Bureau legislation, which has recently been passed in Parliament and will be going to the Senate to be passed, and which will allow for a Credit Bureau to be established in the country so we can track the credit history of persons who are seeking credit in the economy.”
The third loan is for US$60 million, which will go towards the Public Financial and Performance Management Programme II. The objective of this programme is to continue supporting the government in carrying out its reform efforts to improve expenditure management and performance management in the public sector.
Minister Shaw said the reforms combine policy initiatives and government actions in four areas: fiscal responsibility, financial management, public procurement and performance management and accountability.
“These reforms are critical for the coherent operation of the fiscal responsibility framework and for increasing the efficiency of public expenditure, which contribute to ease the fiscal burden,” he said.
The first tranche will be turned over to the government as early as February 19.
The Minister further informed that the government will receive by next week Thursday (February 25) an additional US$30 million.
“(This) will be a total of US$200 million and that will be the first set of draw downs from the IDB and during the course of the remainder of this fiscal year, we expect another draw down of US$400 million from the IDB for a total of US$600 million by the end of 2010,” he said.