Government and IMF Agree on New Three-Year Programme
The Government has reached a Staff-Level Agreement with the International Monetary Fund (IMF) for a US$1.7 billion three-year successor standby programme.
This will replace the existing Extended Fund Facility (EFF) that ends in March 2017, once approved by the IMF’s Executive Board during its meeting, scheduled for November.
This was announced by Prime Minister, the Most Hon. Andrew Holness, and Director of the IMF’s Western Hemisphere Department, Dr. Alejandro Werner, during a joint Government of Jamaica/IMF press conference at Jamaica House on Thursday, October 13.
Mr. Holness said the new facility is a “precautionary” agreement that was negotiated with members of the IMF’s Mission Team who were in Jamaica for the discussions.
The Prime Minister explained that the request was made, consequent on the country’s robust foreign exchange reserves.
He described the US$1.7 billion provision as an “insurance policy” against unforeseen economic shocks that are beyond Jamaica’s control, and that it is a “dividend” that the country has reaped, as a result of its policy credibility and discipline.
“Our request to move to a precautionary arrangement is a sign of strength and reflects the policy credibility and strong macroeconomic management of the Jamaican Government,” he said.
Noting that Jamaica has “made strides” in fiscal and monetary management under the EFF, Mr. Holness said the new programme emphasizes the need for reorientation and transformation of the public sector to an “efficient performance-focused facilitator of growth, social well-being and rule of law.”
In this regard, the Prime Minister said the administration’s goals and direction would include: reorienting public resource allocation towards infrastructure, social protection and security related spending, while transforming the public sector to be more efficient and delivery-focused; modernising the monetary policy framework and building the foundation for an eventual move to inflation targeting; bolstering the resilience of Jamaica’s financial system; and implementing initiatives that unlock Jamaica’s growth potential and promote private sector job creation.
He added that the proposed new programme and the “large and important” commitment of IMF resources is a “firm vote of confidence in Jamaica.”
“I want to say how happy I am that we have been able to reach this stage. This is merely the beginning of the journey, but an important milestone to mark. The Government of Jamaica looks forward to a continued and productive collaborative relationship with the (IMF),” Mr. Holness added.
In his remarks, Dr. Werner said the new agreement reflects the significant focus being placed on attaining inclusive growth.
He noted that Jamaica has “come a long way” in achieving macroeconomic stability and is setting the stage for accelerated growth.
“We are seeing low inflation, we are seeing declining debt to GDP, we are seeing a contained current account deficit, the rebuilding of the international asset position by the central bank…and the foundations of a predictable (and positive) economy for the years to come,” the Director said.
Dr. Werner concurred that the proposed agreement is a “solid” vote of confidence by the IMF in Jamaica. Additionally, it signals the “long-term commitment of the IMF to the Jamaican people.”
He said the IMF is also confident that financing conditions for the Jamaican Government will continue to improve and that “investments will continue to accelerate.”
“We hope that this significant IMF agreement will catalyse resources from other development partners and lower the overall cost of budget financing. We (also) look forward to a continued productive collaboration with the Government of Jamaica,” Dr. Werner added.
For his part, Finance and Public Service Minister, Hon. Audley Shaw, emphasized that the goals Jamaica’s economic programme under the new three-year standby arrangement are “clearly expressed.”
He said the attainment of key policy objectives will require coordination and informed decision-making to ensure that “the right persons are in the right place to take the required steps at the right time.”
“I am committed to leading and ensuring full and comprehensive implementation of the programme which the Government has agreed to follow,” Mr. Shaw assured.