In a statement today, the IMF said these resources will help meet the urgent balance of payment needs stemming from the COVID-19 pandemic, while catalyzing additional support from development partners.
The COVID-19 shock hit Jamaica only a few months after the successful completion of its precautionary Stand-By Arrangement with the IMF, which was underpinned by strong ownership and civil society oversight. Jamaica’s established track record of economic reforms has created buffers that are invaluable today in responding to the COVID-19 crisis.
Yet, despite the authorities’ proactive mitigation strategies, the pandemic is significantly impacting Jamaica’s economy. The Government of Jamaica has declared the entire island as a disaster area and established a special taskforce to coordinate the country’s COVID-19 response and recovery efforts, with the paramount objectives of minimizing the loss of human life and protecting livelihoods.
Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing Director and Chair, said “the Jamaican authorities have proactively responded to the COVID-19 pandemic. Nevertheless, despite the authorities’ best efforts, the pandemic is severely impacting the Jamaican economy, as a sudden stop in tourism and falling remittances are generating a sizable balance-of-payments need.
Moreover, the economic outlook remains subject to an unusually high degree of uncertainty. The disbursement under the RFI will strengthen reserves and help catalyze additional support from other international financial institutions and development partners.
“The authorities’ policy response to the COVID-19 crisis is appropriate, including the timely adoption of targeted measures to support jobs and provide resources to vulnerable segments of the population. The COVID-19 emergency warrants a temporary reduction of the primary surplus and a modest delay in achieving the Fiscal Responsibility Law’s goal of bringing debt down to 60 percent of GDP.
Notwithstanding the delay, the authorities’ renewed commitment to debt sustainability, including their plan to accelerate debt reduction efforts should growth overperform over the medium term, is welcome.
“The Bank of Jamaica’s accommodative monetary policy stance and ongoing efforts to support systemic liquidity and ensure financial stability remain appropriate. Exchange rate flexibility should continue to act as a shock absorber, with FX intervention limited to stem excessive volatility.
“Once the crisis abates, building on their demonstrated commitment to reform and stability-oriented measures, the authorities should continue the implementation of their ambitious reform agenda to support the economic recovery and ensure strong and sustainable economic growth.”
Responding to the IMF’s approval, Finance and the Public Service, Dr. Nigel Clarke, said “The resources approved by the IMF today will be extremely valuable in boosting Jamaica’s foreign exchange reserves, and in assisting Jamaica to meet Covid-19 related balance of payments challenges.”
“Our fiscal and monetary reforms have provided Jamaica with options that many countries do not have. Public body reform, inclusive of divestment and reintegration of public bodies, as well as recent fiscal over-performance has provided substantial cash resources that will be deployed to assist in the financing of the fiscal impact of the Covid-19 pandemic.”
“These tangible dividends of our reform effort further reinforce our continued commitment to Jamaica’s economic reform agenda.”
“We are grateful to the Fund for the quick response to Jamaica’s request which was made exactly one month ago on April 15, 2020.”
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