BY ALICIA DUNKLEY-WILLIS Observer senior reporter email@example.com
JAMAICA has cleared the first hurdle with the International Monetary Fund (IMF) — securing a US$750-million staff-level agreement — and is now awaiting the Board's approval of the recently announced National Debt Exchange (NDX) that should enable the country to secure a deal with the fund.
Prime Minister Portia Simpson Miller and Finance Minister Dr Peter Phillips, in a joint national broadcast on Monday, announced the Administration's plan for what they have termed a "National Debt Exchange Offer" which they launched the following day at the Bank of Jamaica, with the support of leading private sector financial institutions.
Under the debt exchange arrangement — which was first used by the Jamaica Labour Party when it formed the Government — financial institutions and holders of domestic bonds are being asked to take a haircut on interest for the second time in three years as the Government starts implementing measures critical to signing a funding arrangement with the IMF.
The announcement of the NDX came just under a month after an adamant Dr Phillips insisted that there would be "no haircuts" and that a second debt exchange programme was not being contemplated as part of the pending agreement with the IMF.
Dr Phillips, speaking at a press conference at the Ministry of Finance's Heroes Circle headquarters in Kingston yesterday, said the IMF Staff Mission, following a review of Jamaica's economic programme, had arrived at a level of comfort that would enable the fund to confidently present the Government's economic programme, as stated in the Letter of Intent to the management of the fund for their consideration.
"This initial endorsement is subject to the completion of the prior actions and the continued implementation of reforms. The next order of business, therefore, is to complete the National Debt Exchange offer during the coming week and to seek to finalise an agreement with public sector employees soon after," Dr Phillips told reporters. He said the Government was holding faith that the support from the Fund and other multilateral institutions would contain risks and boost investor confidence.
However, the finance minister was unable to say how much in funding the country would unlock from the international market. "There is not yet a final determination; we continue our discussions with the multilateral institutions and our bilateral partners in relation to the degree of support. There are some amounts committed under the programme but there are other discussions which continue to take place in relation to the level of report," Minister Phillips said.
In the meantime, he said the administration was looking forward to the conclusion of the present round of negotiations and looked forward to a similarly favourable consideration by the Board of the Fund.
Head of the IMF Mission to Jamaica Jan Kees Martijn said the staff-level agreement is one of the key elements of an economic programme that can be supported by a 48-month arrangement under the IMF's Extended Fund Facility.
Speaking at the press conference, Kees Martijn indicated that Jamaicans would have to brace for difficult times in the coming months.
"There are no easy choices; the budget will be very tight next year," Kees Martijn said. Furthermore, the IMF Mission Head said the reform of the tax system was "very critical" .
"What we foresee under the programme would be a tax system with a broader base. Incentives should come first of all from having a broad-based competitive tax system," he noted.
It is expected that the IMF's Executive Board will consider the proposed arrangement by the end of March, subject to the timely completion of prior actions to be taken by the Jamaican Government and obtaining necessary financing assurances.