By Stanley Ugagbe
The Executive Board of the International Monetary Fund (IMF) has approved Jamaica’s request for access to the fund’s Rapid Financing Instrument (RFI) in the amount of approximately US$520 million.
In a news release, IMF announced that “This represents 100 per cent of Jamaica’s quota and the maximum amount available under this facility”.
It would be recalled that Jamaica had requested access to the RFI last month with Finance Minister Dr Nigel Clarke stating that the decision was taken to access the instrument because the duration of the “global lockdown” to stem the spread of COVID-19 was highly uncertain.
While pointing to mitigating factors that give Jamaica the ability to absorb economic shocks, Dr Clarke however said “The open-ended nature of the pandemic and its economic spillovers therefore pose intolerable balance of payments risks to Jamaica that threaten the economic gains of our seven-year reform effort”.
According to him, these factors include a reasonable stock of foreign reserves and contingency financing options that arise from (i) the availability of cash resources programmed for accelerated debt repayment; (ii) the availability of domestic sources of financing; and (iii) untapped capacity available from other multilateral institutions such as the Caribbean Development Bank, Inter-American Development Bank, and the World Bank, including by redirecting existing projects.
In their remarks, the IMF noted that the Jamaican Government “has taken strong and decisive action to slow the spread of the new coronavirus in Jamaica, to strengthen public health capacity, and to cushion the economic impact of the pandemic on vulnerable individuals and small businesses”.
Nevertheless, the fund noted that the COVID-19 pandemic has severely impacted tourism-related foreign exchange inflows as well as remittances, and is forecast to significantly dampen economic activity.
In a swift reaction to the IMF approval of the funds, Dr Clarke said it will be extremely valuable in boosting Jamaica’s foreign exchange reserves, and in assisting Jamaica to meet COVID-19-related balance of payments challenges.
Clarke succinctly averred that “Our fiscal and monetary reforms have provided Jamaica with options that many countries do not have. Public body reform, inclusive of divestment and reintegration of public bodies, as well as recent fiscal over-performance have provided substantial cash resources that will be deployed to assist in the financing of the fiscal impact of the COVID-19 pandemic”..
“These tangible dividends of our reform effort further reinforce our continued commitment to Jamaica’s economic reform agenda. We are grateful to the fund for the quick response to Jamaica’s request which was made exactly one month ago on April 15, 2020,” he said.
