Jamaica is set to receive a total of US$1.7 billion from the International Monetary Fund (IMF) as approved last week.
The Executive Board of the IMF gave the go ahead for this approved funding under its Precautionary and Liquidity Line (PLL) and Resilience and Sustainability Facility (RSF).
The 2-year arrangement sets in motion funds from the PLL in the amount of US$968 million from the as insurance against risks from higher commodity prices, a global slowdown, tighter-than-envisaged global financial conditions, and new COVID-19 outbreaks.
In addition to this, US$764 million under the RSF was approved by the board to strengthen the country’s physical and fiscal resilience to climate change, advance decarbonization of the economy, and manage transition risks. The RSF is expected to catalyze funding for climate priorities from other official lenders and the private sector.
The IMF website praised Jamaica on its website stating that the country’s measures to fight against recent global challenges, including COVID-19, the war in Ukraine, and ongoing tightening global financial conditions, have been “well designed.”
However, it then continued on a downward path for the debt. The IMF noted that despite interventions, public debt has been spiralling downward. Inflation has risen above Bank of Jamaica’s (BOJ) 4-6% target band as a result of these global factors with that rate declining since mid-2022.
The IMF website states: “Similarly, the response to the surge in fuel and food prices allowed for pass-through, while providing targeted support within the existing fiscal envelope. The Bank of Jamaica has followed a data-dependent tightening of monetary policy to secure convergence to the inflation target.”
Despite high commodity prices causing an increase in the current account deficit, international reserves remain at healthy levels, and the financial system is well-capitalized and liquid. Deputy Managing Director and Acting Board Chair, Bo Li, said: “The post-pandemic increase in the primary surplus and the ongoing monetary tightening strike the right balance in response to the external shocks, reducing inflation and securing debt sustainability.”
He added that Jamaica’s strong track record of building institutions and prioritizing macroeconomic stability has aided the post-pandemic recovery. He noted that the economy continues to recover strongly from COVID-19, with inflation expected to fall within the BOJ’s target range by the end of 2023.