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KINGSTON — World Bank Executive, Denis Medvedev, has disclosed that the Bank’s US$100 million Second Fiscal Sustainability Development Policy Loan (DPL) to Jamaica was specially tailored to ease the repayment schedule, while ensuring that the qualitative targets are met.

In a radio interview on Thursday, September 15, the World Bank Representative explained that the Bank was able to customize the repayment reschedule.

“In fact, in this particular loan, there was something also interesting and, for the first time, what we have done now is that we have looked at the maturity profiles of the Jamaican debt, and we’ve found periods when the repayments are low relative to other years, and we said let us go ahead and customize the loans, especially if the repayments are done in the years when all the payments are quite low,” he disclosed

He also observed in general, that the terms of the US$100 million loan are attractive. The interest rate has a fixed spread over LIBOR (London interbank offer rate), with a current effective rate of approximately 1.5 per cent. In addition to this attractive interest rate, the loan has easy repayment terms, with a 9.5-year grace period covering over half the 18.5 year life of the loan.

Mr. Medvedev observed that the package of reforms being undertaken by the Government is supported by the loan, and are of critical importance going forward.

“It addresses certain issues that the country has been struggling with for quite some time, and only now we’re seeing the next steps in this reform programme,” he stated.

The World Bank Executive highlighted the promulgation of recent legislation designed to regularize the country’s debt.

“Again, the public debt management act. Prior to this, Jamaica had 19 separate pieces of legislation governing debt management. Now Jamaica has one Act that deals with a lot of issues that makes it very clear how Jamaica will manage its debt, what are the limits on borrowing and so on and what’s very important on this particular one is how the markets will look at Jamaica from this point onward,” he observed.

He explained that this development will also influence how the market values Jamaica’s new bond issues.

“What is important is that the rating agencies and the market will look at this and say, not only did they pass legislation saying they will manage their debt better and more accurately, but they are actually doing it. They actually show a repayment schedule that minimizes the cost of servicing this loan,” Medvedev stated.

He lauded Tax Administration Jamaica for bringing together different departments of government which, he stated, was “something we hope will allow them to work more efficiently (and) more effectively”.

“We also saw last year, a lot of improvements in the ability of people and corporations to file and pay their taxes online. The new online tax portal, we understand that it is not being used as widely still, because it’s something new, but it gives people and corporations a lot of options if it were to be required to do so online,” he explained.  

In terms of the efficiency of the tax system, he observed that there has been “quite a bit” of movement.

“I think we are really seeing in Jamaica, I wouldn’t say a complete change in the outlook and attitude, but we do see commitment and a new attitude towards reforms. I think that this is something, for example, that we saw last year with the JDX,” he said.

He noted that the Government got together with the key creditors and they put together a programme that had a high participation rate.

“This wasn’t just reform paper, this actually happened and when we look at it today, more than a year and a half from the day, we see that the cost of servicing the debt has fallen, dramatically. I mean you were talking about interest payments falling from about 17% of GDP to about 10% GDP,” he stated.

The approval by the World Bank of the second Fiscal Sustainability Development Policy Loan (DPL) to Jamaica, followed an IMF “comfort” letter, required to disburse the funds. The letter contained in the World Bank loan document, dated August 5, noted that, “All end-March quantitative performance criteria were met, except for the central government primary balance, which was missed by a slight margin”.

The Second Programmatic Debt and Fiscal Sustainability Development Policy Loan to Jamaica will support a series of measures to enhance fiscal and debt sustainability, increase the efficiency of financial management and improve the effectiveness of the tax system.

 

By ALLAN BROOKS, JIS Senior Reporter