The Executive Board of the International Monetary Fund (IMF), on Thursday (March 2), approved funding of approximately US$1.7 billion for Jamaica under its Precautionary and Liquidity Line (PLL) and Resilience and Sustainability Facility (RSF).
Under a 24-month arrangement, the country will receive US$968 million from the PLL, as insurance against risks from higher commodity prices, a global slowdown, tighter-than-envisaged global financial conditions, and new COVID-19 outbreaks.
The Board also approved the provision of US$764 million under the RSF to strengthen Jamaica’s physical and fiscal resilience to climate change, advance decarbonization of the economy, and manage transition risks.
The RSF is expected to catalyze funding for climate priorities from other official lenders and the private sector.
A communiqué posted on the IMF’s website praised Jamaica’s response to recent global challenges, among these the COVID-19 pandemic, the war in Ukraine, and ongoing tightening global financial conditions, noting that the measures have been “well designed.”
It pointed out that the fiscal policy response to COVID-19 was “nimble,” supporting the economy in 2020 but then quickly resuming a downward path for the debt.
“Similarly, the response to the surge in fuel and food prices allowed for pass-through, while providing targeted support within the existing fiscal envelope. The Bank of Jamaica has followed a data-dependent tightening of monetary policy to secure convergence to the inflation target,” the Fund further said.
The IMF noted that consequent on these interventions, public debt is on a downward trajectory, and the overall fiscal balance is in line with the medium-term fiscal framework.
While noting that inflation has risen above the Bank of Jamaica’s (BOJ) four to six percent target band as a result of the global factors highlighted, the entity pointed out that rate has been declining since mid-2022.
The IMF further said that although high commodity prices have resulted in an increase in the current account deficit, international reserves remain at healthy levels, and the financial system is well-capitalized and liquid.
Deputy Managing Director and Acting Board Chair Bo Li said Jamaica’s strong track record of building institutions and prioritizing macroeconomic stability has aided the post-pandemic recovery.
He noted that the economy continues to recover strongly from COVID-19, with inflation expected to fall within the BOJ’s target range by the end of 2023.
“The post-pandemic increase in the primary surplus and the ongoing monetary tightening strike the right balance in response to the external shocks, reducing inflation and securing debt sustainability,” Mr. Li added.
Source — JIS
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Edited by Jesus Chan
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