Having successfully met the targets of the first test of the International Monetary Fund (IMF) Standby Arrangement (SBA), Jamaica can now access 63.7 million Special Drawing Rights (SDR) equivalent to approximately $8 billion or just under US$94 million.
On Wednesday (June 23), the Executive Board of the IMF concluded the review of Jamaica’s first quarter economic performance under the SBA. Completion of the review now enables the immediate disbursement of US$93.9 million, bringing total payout under the arrangement to SDR 478 million or about $60 billion (US$704.6 million).
In May, the IMF team, led by Mission Chief for Jamaica, Trevor Alleyne, made its first-quarter assessment of Jamaica and declared that the country had passed the test with relative ease. However, that evaluation was subject to the review and approval of the Executive Board of the IMF.
In its bulletin announcing the outcome of the review and the release of the funds, the IMF Board of Directors stated that, “all quantitative performance targets and structural benchmarks for end-March were met and prospects for meeting the end-June targets and benchmarks appear favourable.”
Minister of Finance and the Public Service, Hon. Audley Shaw (right), greets the International Monetary Fund (IMF) Mission Chief to Jamaica, Trevor Alleyne, at a press briefing at the Ministry last month, regarding the review of the Stand-By Arrangement between the Government and the IMF.
In a supplementary statement, Deputy Managing Director and Acting IMF Chair, Naoyuki Shinohara, further explained that the overall macroeconomic performance under the programme had been encouraging.
“All end-March quantitative targets and structural benchmarks were met. Since the approval of the SBA and completion of the debt exchange, financial market conditions have improved substantially. Market interest rates have fallen to levels not seen since the 1980s and the foreign exchange market has stabilised, with the exchange rate appreciating in recent months,” Mr. Shinohara said.
He also observed that Jamaica’s financial institutions have been able to absorb losses from the debt exchange and that the Government had maintained fiscal prudence during the review period.
“There have been no requests for access to the Financial System Support Fund, which has played an important role in fostering confidence and supporting financial system stability,” he noted further, adding that “the authorities preserved programme targets on the basis of strengthened tax administration and expenditure restraint.”
Mr. Shinohara cautioned that despite the early successes, growth and employment were expected to remain weak this year and continued vigilance was needed as risks remain high.
“Advancing planned fiscal structural reforms is necessary to improve debt dynamics and strengthen the basis for growth. This involves amendments to strengthen the Fiscal Responsibility Framework, strengthening tax administration, and introducing a Central Treasury Management system. Reforming the system of tax incentives will also help reduce economic distortions. The sale of Air Jamaica represents an important milestone. It will now be necessary to focus on moving the public sector reform programme forward,” he emphasised.
With respect to the financial sector, the IMF commended the authorities for the efforts to strengthen the supervisory and regulatory framework now underway and in line with the IMF programme expectations. These reforms include work to enhance capital and margin rules for securities dealers and the introduction of risk-related rules for foreign-currency denominated government securities.
Allocations under the Standby Arrangement will ultimately reach SDR 820.5 million or US$1.2 billion over the 27-month period of the arrangement on condition that Jamaica continues to meet the performance targets set for the loans.
The results of the next review for the three-month period ending June will be disclosed in August 2010. The IMF programme stipulates that Jamaica must face and pass seven other IMF tests up to the end of February 2012.