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© 2010 International Monetary Fund
August 2010
IMF Country Report No. 10/268
Jamaica: 2010 First Review of the Stand–By Arrangement—Staff Report; Press Release on the Executive Board Discussion.
In the context of the first review of the stand–by arrangement, the following documents have been released and are included in this package:
The staff report for the first review of the stand–by arrangement, prepared by a staff team of the IMF, following discussions that ended on May 18, 2010, with the officials of Jamaica on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 8, 2010. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A Press Release summarizing the views of the Executive Board as expressed during its June 23, 2010 discussion of the staff report that completed the request and/or review.
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
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INTERNATIONAL MONETARY FUND
JAMAICA
Staff Report for the First Review of the Stand-By Arrangement
Prepared by the Western Hemisphere Department
(In consultation with other departments)
Approved by Gilbert Terrier and Dominique Desruelle
June 8, 2010
Executive Summary
Context. On February 4, 2010, the Executive Board approved a 27-month SBA in an amount equivalent to 300 percent of quota (SDR 820.5 million). The pillars of the program were: (i) fiscal consolidation and institutional reform, including fiscal responsibility legislation and Central Treasury Management; (ii) public debt restructuring, which was completed as a prior action under the program; and (iii) financial sector reform, including to improve consolidated supervision and the regulation of non-banks.
Economic developments. Since the approval of the SBA and the completion of the debt exchange, which was far more successful than assumed in the program, financial market conditions have improved substantially: market interest rates have fallen to levels not seen since the 1980s and the foreign exchange market has stabilized. Financial institutions have been able to absorb the lower-than-expected valuation and income losses from the debt exchange, and there have been no requests for access to the Financial System Support Fund. Overall economic activity remains weak, although the tourism and agriculture sectors have performed well.
Review of program. All quantitative performance targets and structural benchmarks for end- March were met and prospects for meeting the end-June targets and benchmarks appear favorable.
Appraisal. Based on the overall satisfactory performance and the demonstrated strong ownership of the program, Staff supports the completion of the First Review of the SBA.
Discussions. The mission, which visited Kingston during May 4-18, comprised Messrs. Alleyne (head), Faircloth, Guerson (all WHD), Grigorian (MCM), Konuki (SPR), and Simone (FAD). An MCM mission comprising Ms. Mitchell-Casselle and Ms. Elliott overlapped with the mission during its first week. Mr. Leon, the new resident representative, and Mr. Purves (OED) joined the mission in the second week. The mission met with the Minister of Finance, the Governor of the Bank of Jamaica (BOJ), senior Ministry of Finance and BOJ officials, and representatives from the private sector and the financial sector.
Outreach. At the end of the mission, Mr. Alleyne and Finance Minister Shaw held a joint press conference. The overall tone of the local press coverage of the mission and the program was positive
Contents
I. Recent Developments and Outlook
II. Performance under the Program
III. Policy Discussions
A. Fiscal Program for FY2010/11
B. Fiscal Reform Agenda
C. Financial Sector Reforms
D. Monetary Policy
IV. Staff Appraisal
Boxes
1. Impact of Jamaica’s Debt Exchange on the Financial Sector
2. Impact of the Debt Exchange on Government Finances
Figures
1. Public Debt Sustainability: Bound Tests
2. External Debt Sustainability: Bound Tests
Tables
1. Selected Economic Indicators (Annual)
2. Selected Economic Indicators (Quarterly)
3. Summary of Central Government Operations (In billions of Jamaican dollars)
4. Summary of Central Government Operations (In percent of GDP)
5. Operations of the Public Entities
6. Summary Balance of Payments
7. Summary Accounts of the Bank of Jamaica
8. Summary Monetary Survey
9. Schedule of Reviews and Purchases
10. Indicators of Capacity to Repay the Fund Under a Proposed SBA
11. Public Sector Debt Sustainability Framework
12. External Debt Sustainability Framework
Appendices
1. Jamaica’s Debt Exchange—Outcome and Lessons Learned
2. The Financial Sector Stability Fund
3. Structural Reform Agenda
4. Divestment of Air Jamaica
5. Technical Assistance Priorities under the SBA
Attachments
1. Letter of Intent (LOI)
2. Memorandum of Economic and Financial Policies (MEFP)
3. Technical Memorandum of Understanding
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INTERNATIONAL MONETARY FUND
JAMAICA
First Review Under the Stand–By Arrangement Informational Annex
Prepared by the Western Hemisphere Department
June 8, 2010
Contents
Appendices
I. Fund Relations
II. Relations with the World Bank Group
III. Relations with the Inter–American Development Bank
IV. Statistical Issues
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Press Release No. 10/255
FOR IMMEDIATE RELEASE
June 23, 2010
International Monetary Fund
Washington, D.C. 20431 USA
Telephone 202-623-7100 • Fax 202-623-6772 • www.imf.org
