JAMAICA has reached a staff-level agreement with the International Monetary Fund (IMF) that will open access to US$1.7 billion under two loan agreements — a Resilience and Sustainability Facility (RSF) and a Precautionary and Liquidity Line (PLL).

The IMF made the announcement late Thursday after its staff completed negotiations while conducting its annual Article IV consultation — the regular monitoring of a country’s economy. That report is set to be released next year.

The RSF is in the amount of US$763 million, with the money to be disbursed over 18 months. It is to be repaid in full in 20 years and comes with a 10-year moratorium on principal payments. At the same time, the PLL will give access to US$967 million.

“The PLL will provide valuable insurance to the country against downside risks — including those that arise from extreme weather events — while the RSF will help support Jamaica’s ambitious agenda to increase resilience to the effects of climate change, transition to a zero-carbon economy, and catalyse official and private climate-related financing,” the IMF said in notes accompanying its release on the agreements.

“The authorities’ policy response to global shocks has been well-designed, aiming to contain inflationary pressures, support those worst hit by the increase in the cost of living, and steadily reduce the public debt. Their efforts have facilitated a steady recovery in growth and job creation despite the difficult global environment,” the IMF continued.

The praise comes as Jamaica’s economy continues to show remarkable resilience and is expected to reach pre-COVID-19 levels of production in 2023, while the country’s debt-to-GDP ratio is scheduled to reach the lowest it has been since the late 1990s. However, with the ongoing war in Ukraine and the threat of a recession in Europe and the United States, the country still faces risks which could disrupt the upward trajectory, prompting the Government to seek help before it is needed.

“This is an engagement of choice. We want to be insulated from any temporary shocks,” Nigel Clarke, Jamaica’s finance minister, told a select group of journalists in a call on Thursday to discuss the new agreements with the IMF.

“Access to the Precautionary and Liquidity Line of credit is for countries with strong fiscals but which have vulnerabilities. It’s a sign of Jamaica’s strength,” he boasted while adding, “No other Caricom country can access it now. It’s like having a credit card. The time to negotiate [for facilities such as this] is not when a shock happens.”

He said the PLL is just a backstop which the country hopes not to use, but have in case it is needed.

Accessing the RSF at 3.8 per cent would yield savings of US$35 million to US$40 million per year for the next 20 years, Clarke estimated.

“Never in the life of the fund have they loaned for 20 years,” Clarke said. The details could result in the country saving as much as US$800 million in debt payments over the next two decades.

“I am always trying to find ways to strengthen Jamaica. If I can find ways to save US$40 million in interest a year over 20 years, then I am going to take it. So when these advantageous situations appear — no matter what it might look like to some people — while I am minister of finance we are going to take it,” he continued.

Clarke said the RSF requires that there has to be a companion arrangement and that is where the PLL comes in.

“Again, there is no [other] country in our region which can qualify for that,” he emphasised.

According to the IMF, the PLL qualification process enables signalling the strength of qualifying countries’ fundamentals and policies. The core of the qualification assessment process is that the member country:

* has sound economic fundamentals and institutional policy frameworks;

* is currently implementing — and has a track record of implementing — sound policies; and

* remains committed to maintaining sound policies in the future.

In addition to a generally positive assessment of the country’s policies in the most recent Article IV consultations, qualification for the PLL is assessed against the same qualification criteria as a Flexible Credit Line arrangement, which is for crisis-prevention and crisis-mitigation lending for countries with very strong policy frameworks and track records in economic performance.

“One of the things we want to do going forward is to put in place policies that will increase the climate resilience of our economy. We will focus on the transition from a high carbon economy to a renewable energy economy,” Clarke outlined as he pointed out that the country imports close to US$2 billion per year in fuel.

“Just imagine how stronger Jamaica will be if we could reduce that by 50 per cent,” he wondered out loud.

“As I have written before, throughout Jamaica’s history, economic vulnerability has been one of our key problems. And to create solutions for economic volatility that results from external shocks, [you have] to make yourself strong and resilient in every area, and that is what I am doing.”

With the US$763 million to come under the RSF the Government doesn’t have to raise as much money in the capital markets and that also reduces the country’s financing needs. The funds also come ahead of more than US$1 billion in external debt which will be coming due over the next two years. In theory, the Government could conceivably use the money to refinance that debt.

The IMF board is expected to approve the agreements in early February.