MINISTER of Finance and the Public Service Dr Nigel Clarke has described as an “unfortunate innuendo” questions rehashed since last weekend about the disbursement of US$670 million from the International Monetary Fund (IMF) and the World Bank for foreign exchange and novel coronavirus pandemic support.

The questions were raised by former People’s National Party (PNP) senator and junior foreign affairs and foreign trade minister, Delano Franklyn, in a newspaper column.

Dr Clarke noted: “I am writing to respond to an unfortunate innuendo by Mr Delano Franklyn in his article published in The Gleaner on August 28.

“He referenced the fact that in May 2020, the IMF granted approval for the disbursement of US$520 million, and in March 2021, the World Bank approved US$150 million to assist with COVID-19-related issues, and asked what has happened with these funds, despite the fact that the answers have long been in the public domain, have been carried in local media, and are available with a simple Google search.

“It is entirely possible, however, that he was, and is, totally unaware of this. I, therefore, wish to use the opportunity to recap and expound.”

In his article last weekend, Franklyn wrote: “…In May 2020, the International Monetary Fund granted the approval of US$520 million, and in March 2021, the World Bank approved US$150 million, a total of US$670 million, to assist with COVID-19-related issues. What has happened to these funds? The country needs to know.”

Dr Clarke recalled that the Government applied for access to the IMF’s Rapid Financing Facility in April 2020, due to the then anticipated deleterious impact of COVID-19 on Jamaica’s foreign exchange inflows.

He said that this was quickly approved and disbursed by the IMF in May 2020, in an amount of US$520 million. Eventually, more than 100 countries successfully applied for access to this facility.

“As I disclosed in Parliament and on social media at the time, which was carried in the print and electronic media, including in The Gleaner, these funds have been used to shore up the foreign exchange reserves of our central bank,” he said.

He said that one of the sharpest and most dangerous economic effects of the pandemic has been the precipitous collapse of foreign exchange earnings from tourism, and that during 2020, Jamaica’s foreign exchange earnings from tourism fell by approximately 74 per cent, or US$2.5 billion.

“There is absolutely no historical precedent for such a disintegration of Jamaica’s foreign exchange supply. As a comparison to make the point, during the global financial crisis of 2009, Jamaica’s foreign exchange earnings declined by five per cent. In the aftermath of the 9/11 terrorist attacks, Jamaica’s foreign exchange earnings declined by 14 per cent,” he noted.

He noted that Jamaica has an open economy, where trade represents 80 per cent of gross domestic product. Therefore, an inadequacy of foreign exchange reserves could metastasize, leading to a crippling balance of payment crisis that would severely complicate and delay recovery.

“We have experienced this many times before. Jamaica entered into programme relationships with the IMF that covered a combined 32 years, out of the 59 years since Independence. Each of the 16 times that Jamaica has entered into a programme relationship with the IMF, the problem has been related to, or been evidenced by, an inadequacy of foreign exchange reserves in our central bank,” Clarke said.

“The good news is that Jamaica’s gross foreign exchange reserves now stand at approximately US$4.8 billion, and our net international reserves are approximately US$3.8 billion. These are at the highest levels in our history and provide us with protection, as we continue to face the uncertainties of the pandemic and as we embark on the recovery of lost tourism earnings and output,” Clarke explained.

On the World Bank’s US$150-million loan, he said that the bank’s COVID-19 Response and Recovery Development Policy Loan was approved on March 18, 2021, which was also reported by the press.

The loan was signed on March 24, 2021 and drawn down in full on March 31, 2021, and April 1, 2021. The amounts formed part of the financing of Jamaica’s 2021-22 budget, passed by Parliament in March. Accessing of the budget support loan was structured around Jamaica achieving three interrelated pillars, prior to the approval and disbursement of the loan. These were: ongoing efforts of the Government to protect poor and vulnerable households and communities from the economic and social shocks of the novel coronavirus pandemic; promote sustainable business growth and job creation by assisting firms to survive the initial shock associated with the pandemic and protect jobs; and, a long-term recovery effort by strengthening monetary, fiscal, and environmental policies for sustainable growth and transparent debt reduction.

— Balford Henry