Government’s Access Request Endorsed by Business Leaders

The Government’s decision to request access to approximately US$1.7 billion under the International Monetary Fund (IMF) Precautionary and Liquidity Line (PLL) and Resilience and Sustainability Facility (RSF), for which Jamaica qualifies, has been endorsed by business leaders.

Both funding lines are intended to bolster Jamaica’s economic and climate resilience buffers and help the country to prepare for any future adverse economic or weather-related disruptions.

The request, for which a Staff Level Agreement was reached between the Government and IMF, is expected to be considered by the Fund’s Executive Board in early 2023.

The PLL, through which US$967 million is being made available, will provide Jamaica with valuable insurance against downside risks, including those arising from extreme weather events, and is designed to support member countries with strong economic fundamentals.

Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, says Jamaica’s qualification for this credit line “is a signal of our economic strength and stability”.

Additionally, the RSF will allow Jamaica to access up to US$763 million to help support the country’s ambitious agenda to increase resilience against the effects of climate change, transition to a zero-carbon economy, and catalyse official and private climate-related financing.

Dr. Clarke indicates that this provision will be available at an interest rate of approximately 3.8 per cent, with a repayment period of 20 years and no payback of the principal for the first 10 years.

Newly elected Private Sector Organisation of Jamaica (PSOJ) President, Metry Seaga, welcomes the decision as a “good move”.

“I think it’s proactive. I think that the Minister of Finance has acted responsibly to get funding that is cheaper than that we currently have access to, and that has better terms… it’s a 20-year term. So if we do need the funds, he has it at his avail. I have no problem with it,” he tells JIS News.

Mr. Seaga says Dr. Clarke’s assurance that the arrangements to access the funds will not interfere with Jamaica’s programmes and activities is comforting.

“Yes… absolutely. I think it’s the way that our fiscal management needs to be. I think the Minister of Finance has made a progressive move,” he adds.

Jamaica Employers’ Federation (JEF) President, David Wan, says the decision is “very positive, wise, and timely”.

“It’s a good insurance policy because… we have some bonds maturing over the next two years that were issued, probably seven to 10 years ago. So, it’s a very positive move to be looking forward and saying, let’s put in place a standby facility that, should we need it, and we can’t get to refinance our bonds that become mature, we’ll be able to get money from the IMF to refinance those bonds,” he points out.

Dr. Clarke indicates that Jamaica has more than US$1 billion of external debt maturing in fiscal years 2023/24 and 2024/25 that needs to be refinanced “at what could possibly be interest rates that are higher than today”.

“You don’t want those countries [like Jamaica] who, before the war and everything [else], were on fairly sound financial footing, but suddenly [encounter] problems because of the war, which is… something beyond their control,” Mr. Wan tells JIS News, while emphasising that there are no accompanying conditionalities underlining the funding arrangements.

Mr. Wan says the decision illustrates that the authorities are thinking ahead, in terms of determining how best to prepare for future exogenous challenges.

“We don’t want to wait until we get into problems before [going] to the IMF. It’s a credit to the Ministry of Finance that they are thinking two-steps down the road. It’s hard to find a downside to this… . There’s no reason we shouldn’t do this,” he adds.

Newly elected Jamaica Chamber of Commerce (JCC) President, Michael McMorris, lauds the Finance Ministry and Government for being “very proactive” in moving to access the funding lines.

“A concern is that you make these efforts without it costing the Government too much money [and] that you do [so] efficiently. We are assured that there will be no net increase in the Government’s sovereign debt over the period [should] they draw down on these lines,” he tells JIS News.

Seprod Group Chief Executive Officer (CEO), Richard Pandohie, describes the Government’s decision to take steps to boost its capacity in the event of a disaster as “the sensible thing to do”.

“It can’t hurt to have the capacity. It’s like having a credit line at a bank… you don’t necessarily have to use it. But in the event of needing it, you have it there,” he points out.

Mr. Pandohie concurs that the Finance Minister’s assurance that none of the macroeconomic programmes and activities now in place will be impacted is comforting.

“From a fiscal standpoint, I think there is a high level of comfort with how that has been operated… [and that’s] a good thing. I think [that] if you were to canvas persons… there’s confidence in the fiscal management of this country. From an external perspective, when I travel around the Caribbean, they speak highly of that about Jamaica. So congrats… to that team on what they are doing, and long may it continue,” he adds.

Business analyst, Warren McDonald, says he doesn’t anticipate any downside to the decision.

“As indicated, [the funds are] a sort of buffer… a sort of insurance which, I think, could be useful… as a possible precaution for future catastrophes. It’s an additional facility being provided without [interfering with the programmes] we have already planned,” he points out.