NO deadline for finalising an International Monetary Fund (IMF) deal has been made public.
However, come February 24 the Government will have to find US$320 million in hard currency to pay its creditors, along with a more staggering $88 billion in local currency.
The debts are mostly owed to Jamaican banks and investors, so it is likely that the funds to be repaid could be raised from the same pool that would be paid out locally.
But the lack of a clear IMF agreement, or at the least, a final letter of intent to be taken to the multilateral lending agency's board before the debts become due, may further push up interest rates and lead to an even weaker dollar.
A deal is expected to release locked up foreign currency inflows from other multilaterals, like the World Bank, and bilateral partners, such as the EU, but the window for the Government to secure an arrangement before it faces a potential fiscal cliff is closing.
Meetings of the IMF's executive board are already scheduled up to next Wednesday, when the fund will look at the first and second reviews under the Extended Arrangement for Greece, which was approved last March.
That gives Jamaica five weeks to lay everything on the table and get the important stamp of approval, which will signal to the market that a feasible economic programme will be undertaken over the next four years.
On the other hand, a few issues are still left to be sorted out.
Chief among them are how the Government plans to deal with tax waivers and incentives and achieve higher primary surpluses and sharper cuts to the public debt, according to Finance Minister Peter Phillips.
Even then, when they have agreed on those terms, certain actions will have to be undertaken "subject to that approval of the Cabinet and the necessary consultations with local stakeholders" before the IMF board will give its approval.
The lack of a deal thus far has fed into lower investor confidence and economic uncertainty, which was reflected in the decline on the local stock market and devalued dollar last year.
"Concerns exist also in relation to the upward pressure on interest rates," said Victoria Mutual Building Society President Richard Powell, who was speaking to the Jamaica Observer on the state of the financial sector coming into 2013.
"From a financial market perspective, one of the important ramifications of the situation is that investors are adopting a short-term horizon, not being prepared to assume the risks of making long-term investment commitments," he said.
For instance, average yields for treasury bills rose last month, with 91-day instruments seeing the rate climb as high as 1.3 percentage points over two months.
And for two of the tenors, the yields, which are calculated based on weighting the prices investors have indicated that they are willing to pay for them, rose to levels not seen since January 2011.
Additionally, demand for the longest tenor -- the 182-day Treasury bill -- was undersubscribed for the second consecutive month in December.
The rates, which are used as a guide to setting interest rates on bank loans and savings rates, were relatively stable between April and October, but moved from a range of 6.2 per cent to 6.7 per cent during that period, depending on the length of maturity, to as high as 7.67 per cent.
Pressure on the Government to put Jamaica's fiscal house in order has already resulted in tax implications for the financial sector.
A modified assets tax of 0.2 per cent of the assets of Bank of Jamaica (BOJ) and Financial Services Commission (FSC) regulated companies was imposed last July, while financial institutions won't benefit from the reduction in corporate income tax, which was lowered from 33 1/3 per cent to 25 per cent on January 1.
But economic reform and a pending IMF deal, which characterised the latter half of 2012, were not the only things to define the financial sector last year.
Commercial banks' non-performing loans (NPLs) fell by $570 million over the three months to September 30.
The decline over the quarter was a continuation of a trend since loans left unserviced for three months or more -- NPLs -- peaked at just over $23 billion last December.
NPLs fell to $19.9 billion at the end of March before gradually making its way down to $18.9 billion at the end of September.
Moreover, total commercial bank loans outstanding increased over the nine months to September last year, from $246 billion to $299 billion, or 21 per cent, mainly due to growth in personal loans.
"The renewed loan growth from last year should continue into the 2013 and the financial sector stands ready to support (the growth) sectors," said Courtney Campbell, president of GraceKennedy Financial Services. "In 2013, there is opportunity for growth in the ICT, tourism, manufacturing and maritime sectors."
The two approved credit bureaus, which become operational this year, should also lead to increased lending, as individualsâ and businessesâ creditworthiness play more of a role on lending decisions by banks.
On the other hand, lower net interest income on loan stock at deposit-taking institutions was the reason for the flat performance of the financial sector during the first nine months of 2012, according to the Planning Institute of Jamaica (PIOJ).
The PIOJ, however, did report higher earnings from fees and commissions.
But the 11 per cent decline on the local stock market last year adversely impacted the equity portfolios of life insurance companies, according to Guardian Life Limited President Eric Hosin.
He also identified "contraction of organisations, reducing budgets, pressure to reduce employee costs, and the impact on employee benefits", as major challenges last year.
Indeed, the financial sector itself reported 23,400 employees last July compared to 25,300 a year earlier.
Financial institutions also face a possible cost-crunching dilemma in the form of the new US tax compliance rule requiring them to release personal financial information of clients to American authorities.
It could cost banks tens of millions of dollars whether they choose to comply or not with the Act, which should come into effect this month.
Foreign Account Tax Compliance Act (Fatca) requires financial institutions around the world to report the names and tax identification numbers of "US persons", a definition used by the Act that is so broad that it could catch people who have a green card or even just a mailing address in America -- with balances above US$50,000 ($4.6 million) to the Internal Revenue Service.
Even then, companies, such as GraceKennedy Financial Group, will continue to focus on increased efficiency and productivity, but the banking and insurance group has also set its sight on the region -- at least in terms of insurance.
According to Campbell, the group's insurance arm already does underwrite a small amount of insurance in Turks and Caicos and Dominican Republic, but the company aims to focus more on spreading its risk.
Other local institutions have already taken steps towards expanding their regional presence, such as National Commercial Bank, which is in the process of buying Trinidadian merchant bank, AIC Finance.
Jamaica Money Market Brokers is also making a bigger push in Dominican Republic, but regional companies are also shoring up their positions in Jamaica.
In the second half of 2012, Guardian Holdings bought West Indies Alliance to strengthen its position in the property and casualty side of the insurance business as the number one general insure, while Sagicor Finance renamed its bank -- Pan Caribbean -- to carry its own brand.
Hosin said that his company is currently planning development of some of its property holdings, as well as "considering real estate as an option to provide additional portfolio diversification for our pension clients".
But economic reforms being pressed for to secure an IMF agreement, as well as, sustainable economic growth in the long term, could also lead to near-term opportunities for the insurance sector.
"The move to a contributory pension system for the public sector will provide opportunity for Administration and Investment Management services for the newly established public sector pension fund," said Hosin.
Powell believes that the "restoration of investor confidence should make for better business prospects in the second half of 2013 and beyond, this being a necessary, albeit insufficient condition for sustained business and economic growth".
"This will obviously make for improved performance of all segments of the financial markets," he said.