It's a deal. Jamaica gets IMF bailout

It's a deal.

The International Monetary Fund (IMF) on Thursday approved Jamaica's application for a US$1.27-billion loan. Under the agreement, Jamaica would be able to access half of the funds immediately.

The 27-month Stand-By agreement was negotiated between the IMF and the Golding administration over six months.

A statement from the IMF said the first payment is to make sure the local financial institutions which hold most of Jamaica’s debt have immediate access to cash to help maintain their liquidity.

The loan is aimed at supporting Jamaica to help the country recover from mounting government debt, weak economic growth, and the effects of the global economic crisis.

Jamaica will use the money to implement a two-year plan that would include reform of the public sector to substantially reduce the large budget deficit, a debt strategy to reduce debt servicing costs, and reforms to the financial sector to reduce risks.

The IMF plan also includes a number of reforms in key areas, including tax policy to improve collection and administration; the public sector, to reduce costs and increase efficiency; and fiscal responsibility legislation, to improve budget planning, and public financial management, and make the government more accountable.

The IMF expects that the bailout would get the Jamaican economy moving again, taking it from a negative 3.5 per cent in 2009 to 0.5 per cent by late 2010. It predicts that growth would increase to two per cent in 2011.

Jamaica’s economy has taken a beating in recent years, in part due to the effects of the global economic crisis, which has increased the country’s large debt burden.

Sharp falls of 60 per cent in bauxite and aluminum production and exports, and a sharp decline in the amount of funds sent by Jamaicans living abroad, also contributed to the contraction in the economy.

The government had to make some politically damaging changes to qualify for the IMF loans, which included raising taxes to offset falling revenues.

One measure that the government took to deal with its economic crisis was to divest its debt ridden national carrier, Air Jamaica.

It is continuing discussions with Trinidad and Tobago for a takeover of the airline by Caribbean Airlines. Both governments have been silent on the negotiations.

Jamaica said this week it would make an announcement during its budget presentation in April.

Read the story: Air Jamaica, CAL takeover talks on track but no announcement until April