Jamaica, IDB sign US$200 million loan to strengthen fiscal policy

Part of financing to support reform program.

The Hon. Audley Shaw, Minister of Finance and Public Service of Jamaica, and Inter-American Development Bank President, Luis Alberto Moreno, signed today a US$200 million loan for a fiscal consolidation program.

The government of Jamaica will strengthen the country’s fiscal policy with support from the Inter-American Development Bank. This operation brings loan approvals this year to more than US$400 million, in line with expected total approvals of around US$600 million in 2010. The IDB previously approved more than US$200 million to Jamaica this year in programs to support, among other areas, reforms in education, protection of human capital and competitiveness.

Disbursement of this fiscal policy loan, the first in a series of as many as three operations, is based upon fiscal measures taken by the government since the end of 2009 and during the first semester of 2010 to restructure public debt, increase revenue and control spending to meet the targets set out in its reform agenda, also supported by a stand-by agreement with the International Monetary Fund.

The second and third operations would aim to support the government’s efforts to undertake deeper, structural fiscal policy reforms in order to reduce the country’s debt burden and financing needs in the medium-term.

In the context of the deterioration of the global economy, a deep recession and low growth,

Jamaica is committed to implementing far-reaching policy and institutional changes to reduce the fiscal and current account deficits that make the country significantly vulnerable to economic shocks.

This fiscal consolidation program will support the government of Jamaica’s efforts to achieve stable, sustained growth in a context of sound macroeconomic policy, and a consolidated fiscal balance, focusing on increasing tax revenue, streamlining expenditure and reforming the public sector. It will include a comprehensive debt management strategy that addresses the debt overhang, a strengthened fiscal responsibility framework, and increased customs efficiency.

The Ministry of Finance and Public Service will carry out the program. The IDB loan is for a 20-year term, with a 5-year grace period, at a Libor-based variable interest rate. It will be disbursed in a single tranche.| BID