Jamaica Closes on IMF Pact

The IMF says it has reached an agreement with Jamaican authorities on key elements of a program that the IMF would support with a 27-month $1.3bn loan under a stand-by arrangement (SBA). The bank adds that its executive board will consider Jamaica’s SBA early in 2010. The program, says the IMF, will involve a mixture of controls on public sector salaries; some tax increases, as well as cuts in other spending. “On the margin, this is positive news for the credit, as this SBA is to catalyze significant additional financing from multilaterals, which have a relatively low portfolio in Jamaica,” says RBS. It adds that at end of FY 2008/09, multilateral debt amounted to only 10% of Jamaica’s public sector debt. Meanwhile, the Jamaican government seems to be moving to comply with IMF requisites. The finance ministry has announced a tax package amounting to JMD21.8bn, or 2% of GDP, which includes an increase of the general consumption tax to 17.5% from 16.5%, raising the special consumption tax on fuel and cigarettes, and upping the electricity rate on usage exceeding 200KWH per month. The ministry also announced a freeze of government wages for the next 2 years.