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Jamaica to draw on IMF funding

Published:Friday | April 17, 2020 | 12:24 AMSteven Jackson/Senior Business Reporter
Finance and the Public Service Minister Dr Nigel Clarke gestures during a Gleaner Editors' Forum recently. Clarke last month said that IMF funding was not on the cards but has changed his tune as Jamaica's COVID-19-related economic fallout has worsened.
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Finance and the Public Service Minister Dr Nigel Clarke gestures during a Gleaner Editors' Forum recently. Clarke last month said that IMF funding was not on the cards but has changed his tune as Jamaica's COVID-19-related economic fallout has worsened.

Jamaica intends to enter into a lending arrangement with the International Monetary Fund (IMF) as it admits that the Government will make significant adjustments to the 2021 Budget arising from the economic fallout from the COVID-19 pandemic.

A successful consideration of the island’s application would result in the 17th arrangement with the fund since Jamaica became a member, according to IMF data. The last Article IV Executive Board Consultation was on June 17, 2016.

“On behalf of the Government of Jamaica, I hereby request access to the Rapid Financing Instrument within the increased access limits announced by the IMF last Monday, April 6,” Minister of Finance Dr Nigel Clarke said in a letter to IMF Managing Director Kristalina Georgieva.

Clarke is expecting to have the cash, a maximum of US$500 million, in Jamaica’s hands by mid-May.

The reaching out to the IMF is evidence of how quickly the COVID pandemic has turned the screws on the Jamaican economy. Clarke, on March 27, had told The Gleaner that re-engagement with the multilateral was not on the cards at that time.

On Tuesday, the IMF released its World Economic Outlook, revising the growth prospects for Jamaica from 1.0 per cent to negative 5.6 per cent for 2020.

The RFI provides rapid financing to IMF member countries with balance of payment needs but without the requirement of having a full-fledged IMF programme, ongoing reviews, and conditionalities.

Access under the RFI is limited to 37.5 per cent of quota per year and 75 per cent of quota on a cumulative basis. Jamaica currently holds a quota of 382.9 million in special drawing rights (SDR), which would give access to 143.6 million SDR. The IMF uses SDRs as a weighting of five key currencies that are similar in value to the US dollar.

The IMF, after the conclusion of the last lending arrangement, described Jamaica as a success story, moving towards sustained economic stability, low unemployment, low inflation, low interest rates, and the lowest debt in two decades. Rapid economic growth, however, eluded the island, but at the conclusion of the last lending arrangement, the IMF described Jamaica as being “on a path to higher economic growth”.

In 2013, the island was described as being in a precarious position of excessively high debt, its bonds described as junk, and micro- and macroeconomic instability.