Leaders of Jamaica’s financial sector are expressing support for the Jamaica Debt Exchange (JDX) initiative, launched on January 14 as a critical element of an economic programme agreement with the International Monetary Fund (IMF).
The importance of the initiative was emphasised by the Managing Director of the Fund, Dominique Strauss-Kahn, in a statement hours before the launch confirming an agreement between IMF staff and the Jamaican Government.
Mr. Strauss-Kahn emphasised that the programme could go to the Executive Board for final approval in weeks, pending prior actions to be taken by the Jamaican Government, which would include implemention of the JDX initiative.
Jamaica is seeking a SDR 802.5 million (about US$1.25 billion) loan under a 27-month Stand-By Arrangement (SBA) with the IMF. Approval of the SBA is also expected to catalyse about US$1.1 billion in funding from other international financial institutions including the World Bank and the Inter-American Development Bank (IDB). However, the Government has insisted that it will not accept the transaction without “substantially” 100% participation from stakeholders.
President/CEO, Scotia Group Jamaica Bruce Bowen.
President of the Jamaica Bankers Association (JBA), Ms. Minna Israel, President and CEO of Scotia Group Jamaica, Bruce Bowen, and Group Chief Executive Officer (CEO) of Jamaica Money Market Brokers Limited (JMMB), Keith Duncan, gave their approval at the launch at the Bank of Jamaica’s (BoJ) auditorium, downtown Kingston.
“It’s a partnership. It’s a commitment that we are making. We are sharing the burden. We’re sharing the pain for long term stability and growth. We are committed, as an industry, to play our part,” said Miss Israel.
Mr. Bowen lamented that Jamaica’s current debts, and the existing debt service levels, were unsustainable and had reached the point where the private sector was being “crowded out” of benefits which could accrue to it.
“What is clear is that something has to be done,” Mr. Bowen asserted.
CEO Jamaica Money Market Brokers Limited Keith Duncan,
Mr. Duncan described the JDX as an undertaking of “historical importance”, signalling the start of a “bold and unprecedented” step in transforming the economy.
“We have always believed, and advocated, that a debt swap of some form would give Jamaica the fiscal space to get its act together. We believe that this debt exchange is for the national good and, therefore, I am pleased to announce that JMMB’s Board of Directors approved 100 per cent participation,” he told the launch.
Mr. Duncan also urged the Government to “ensure fiscal prudence” and seek to “develop a national initiative” to ensure fiscal growth.
Mr. Bowen said that the key to Jamaica’s economic success was a realistic and sustainable medium term economic plan that deals with fiscal discipline, transparency in financial decisions and looks at revenues and expenditures.
“We know that we need to play a leading role. I believe if we analyse this right, if we make the right decisions, we will take the action that will make a difference for Jamaica, that will set the economy on the right path,” he suggested.
Miss Israel, alluding to discussions between the Government and stakeholders preceding the launch, expressed her appreciation for the process of involvement, and stressed the importance of consensus on the structural and operational issues of the initiative.
“We look forward to holding you to your commitments, your undertaking, your covenant, that we will see tight and strong fiscal management and transparency because, without that, we may be back here three or four years from now, and we can’t afford that,” she cautioned.
She urged full support for the JDX, to ensure the creation of a Jamaican nation that is economically viable and strong.
The Government of Jamaica intends to announce the results of the JDX on the Announcement Date, January 27, 2010, but will otherwise announce the results as soon as practicable and no later than on the Final Settlement Date, February 16, 2010 (subject to the right of the Government to extend the Final Settlement Date).
The JDX is a new debt management initiative which entails the voluntary exchange of existing bonds, excluding Treasury Bills, issued by the Government in the domestic market, for new bonds of the same principal value, but at a lower interest cost and over a longer maturity period.
The exchange ratio will see each $100 of old bonds being exchanged for new $100 bonds. The offer, which opened on Thursday, is scheduled to expire on January 25, with settlements expected to on February 16.