US$100 Million Fiscal Support from CDB

Funding for the Government’s fiscal and debt sustainability initiatives has been boosted by a US$100 million (J$8.5 billion) policy-based loan, from the Caribbean Development Bank (CDB).
The facility will increase the support being provided to the administration by fellow multilateral funding agencies, the Inter-American Development Bank (IDB), and the World Bank, in the area of policy reform.
Finance and the Public Service Minister, Audley Shaw, and CDB President, Dr. Compton Bourne, on Monday (February 2), signed the loan agreement, during a ceremony at the Ministry’s National Heroes Circle offices, in Kingston.
In a brief address, Mr. Shaw said the loan, which is being made available at an interest rate of 4.5 per cent, would be disbursed in three tranches of US$33.3 million over a two-year period, “spanning, possibly, three fiscal years.” The first tranch, he added, is expected to be forthcoming sometime this week.
The Minister informed that the administration has benefitted from CDB loans, amounting to some US$196.4 million, since assuming office in September, 2007. A breakdown of the provisions shows: US$25.9 million towards the upgrading and expansion of the University of Technology (UTech); US$12 million to effect community development projects; US$20.5 million for the Hurricane Dean recovery effort, incorporating mitigation works along the Palisadoes road; US$7.8 million channelled into the agricultural support project; a US$30 million loan for tropical storm Gustav rehabilitation efforts; and the US$100 million policy-based loan signed on February 2.
“As in the other cases of the policy based loans, these loans are based on a specific commitment that has been made by the Government of Jamaica, towards improving the processes of governance. The issues that we are focussing on. have a direct bearing on our capacity to be more competitive (globally),” Mr. Shaw explained.
Dr. Bourne pointed out that the loan is the largest single disbursement approved by the agency for any member country. He also pointed out that it is a critical component in a package of financial assistance, which the CDB engineered with the IDB and the World Bank, to provide Jamaica with the “fiscal space to make essential economic growth enhancing investments in economic infrastructure and poverty-reducing expenditures.”
He noted that, while Jamaica has been responding effectively to poverty through well targeted social programmes, an analysis of the growth diagnostics points to several constraints.
“Economic infrastructure is in need of upgrade, investment in health and education is insufficient, and institutions, particularly in the justice sector, need to be strengthened, in order to effectively fight crime,” he said, noting that Jamaica has one of the “tightest fiscal constraints, outside of Guyana.”
Dr. Bourne reiterated that the policy-based loan would support the administration’s fiscal and debt sustainability initiatives within a comprehensive reform agenda, designed to effectively control the expansion of public sector debt; strengthen financial management and policy reform, and streamline revenue systems and enhance private sector competitiveness.
“The loan is part of a broader multi-year assistance strategy by the CDB for Jamaica, which seeks to strengthen macroeconomic management, upgrade critical economic infrastructure, facilitate expansion of output, support human resource development, directly reduce poverty through community development, and support environmental sustainability,” the CDB President outlined.
During 2008, Jamaica benefited from CDB loans totalling almost US$160 million, making the country the largest recipient of financial assistance from that multilateral agency.