Jamaica, IDB sign second US$200 million loan for fiscal policy reform

Operation brings total IDB financing to US$600 in 2010.

The Hon. Audley Shaw, Minister of Finance and Public Service of Jamaica, and Inter-American Development Bank President Luis Alberto Moreno signed on December 15 a US$200 million loan, consisting of the second IDB financing for the country’sfiscal consolidation program.

This operation brings IDB total loan approvals to Jamaica to US$600 million in 2010 in support of the Government’s fiscal reform program. A first operation of also US$200 million was approved in August to strengthen the country’s fiscal policy. Both unprecedented financings were based on fiscal measures taken by the government this year to improve public debt sustainability, increase public revenue, control spending and modernize customs. The Government of Jamaica’s fiscal reform agenda is also supported by a stand-by agreement with the International Monetary Fund.

“The IDB hails the commitment of the Government of Jamaica to implement far-reaching policy and institutional changes to solve the fiscal imbalance,” said Moreno. “In the difficult context of the global economy and low domestic growth, these measures significantly reduce the vulnerability of the country to adverse shocks.”

In view of the deterioration of the global economy during the international financial crisis and prospects of a sluggish recovery of the global economy, the GOJ has implemented a variety of fiscal measures, including increasing tax revenues, containing public spending and reducing public sector debt and debt services, in order to substantially reduce the budget deficit and strengthen the fiscal policy stance and sustainability over the medium-term.

The IDB previously approved close to US$200 million to Jamaica this year in programs to support, among others, reforms in education, protection of human capital and competitiveness.

In the future, an expected additional third operation for the fiscal reform program would aim to support efforts to deepen structural fiscal policy reforms to reduce the country’s debt burden and financing needs in the medium-term.