WASHINGTON, (CMC) – The International Monetary Fund (IMF) on Thursday announced that its Executive Board has approved a total of US$1.7 billion for Jamaica, the majority of which will provide insurance against risks from higher commodity prices, a global slowdown, tighter-than-envisaged global financial conditions, and new COVID outbreaks.

READ: US$1.7-b insurance-Jamaica secures IMF loans to combat global shocks and climate change

A statement from the Washington-based financial institution said about US$968 million had been approved for a 24-month programme under the Precautionary and Liquidity Line (PLL) arrangement.

The other US$764 million has been approved under the newly created Resilience and Sustainability Facility (RSF) to strengthen physical and fiscal resilience to climate change, advance decarbonisation of the economy, and manage transition risks.

The RSF is expected to catalyse funding for climate-related investment from other official lenders and the private sector, the IMF said.

“Reforms in the RSF, built on Jamaica’s home-grown climate policy, were prepared in close collaboration with the World Bank and other international partners. They create incentives to switch to renewables, reduce energy consumption, develop green financial instruments, and require proper management of climate risks in the financial sector,” IMF Deputy Managing Director and Acting Chair of the Board Bo Li said.

The IMF said in its statement that over the past few years, Jamaica has been buffeted by a difficult global environment featuring the COVID-19 pandemic, the war in Ukraine, and the ongoing tightening of global financial conditions.

However, it said, supported by sound policy frameworks and policies prioritising macroeconomic stability, the economy is now recovering strongly.

“As COVID waned, tourism has rebounded to pre-crisis levels, and 2022 real GDP growth is expected to be around four per cent. Public debt is on a downward trajectory and the overall fiscal balance is in line with the medium-term fiscal framework,” the fund said.

“Pushed by global factors—in particular, the impact of the war in Ukraine on commodity prices—inflation has risen above the Bank of Jamaica’s target band but is declining since mid-2022. High commodity prices have resulted in an increase in the current account deficit, but international reserves remain at healthy levels. The financial system is well-capitalized and liquid,” IMF added.

The IMF said the outlook points to a continued recovery and inflation falling back within the Bank of Jamaica’s target range by end-2023. However, it said, the economy is facing significant external risks.

“The war in Ukraine may push commodity prices higher, a stronger-than-envisaged tightening of global financial conditions may curb capital flows and reduce remittances, and new COVID variants could disrupt tourism and trade,” it cautioned.

The IMF lauded the authorities’ response to recent shocks, describing it as well designed. It said the policies have struck the right balance in responding to shocks, protecting the vulnerable, countering inflationary pressures, and further securing debt sustainability.