* World Bank, IADB also committed funds to total $2 bln
* Aim to help Jamaica reduce debt burden, boost growth
* Analysts say government has hard task ahead
By Anna Yukhananov
WASHINGTON, May 1 The International Monetary
Fund's executive board on Wednesday approved a $932.2 million
four-year lending agreement with Jamaica meant to help the
Caribbean country start to reduce its heavy debt burden.
The money will complement about $510 million in planned
funds from both the World Bank and the Inter-American
Development Bank, which together will bring Jamaica's loan
package to nearly $2 billion. Jamaica will get $207 million in
IMF funds immediately.
Jamaica's ratio of government debt to GDP hovered at around
140 percent last year, according to the IMF's latest assessment
of the country's economy. Jamaica has also grappled with a drop
in international reserves and a sharp slide in the Jamaican
The country's high debt service payments have limited the
government's ability to provide services needed to achieve
sustained rates of growth, the IMF has said.
"The main objective of the program is to put public debt on
a firmly downward trajectory and thereby create a virtuous cycle
of debt sustainability and higher economic growth," David
Lipton, the IMF's first deputy managing director, said in a
Jamaica's 2010 loan agreement with the IMF lapsed after the
government failed to meet performance targets, and some analysts
have expressed skepticism about a new program.
"We're agnostic. We think it is a very positive first step,"
Gabriel Torres, the lead Moody's analyst for Jamaica, said of
the loan program, adding that "it will require a lot of
Moody's currently rates Jamaica's debt as B3, above default
but still posing a high credit risk. Fitch's rating is CCC,
while Standard & Poor's raised its rating from default to
CCC-plus after Jamaica completed a domestic debt exchange with a
high level of participation.
In addition to the debt exchange, Jamaica has already made
some other reforms in preparation for the program, such as
agreeing to a wage freeze for government workers and proposing a
budget with a primary surplus of 7.5 percent of GDP.
The IMF said these actions were signs the government was
serious about change.
"Although the risks to the program are high, the
implementation of the prior actions, the frontloaded nature of
the reform agenda, and the envisaged collaboration with
development partners should help foster the successful
implementation of the program," the IMF's Lipton said.
As part of the program, Jamaica will have to make structural
reforms, improve price competitiveness and reduce government
spending and the debt while still improving social protection
Carl Ross, managing director at Investments Oppenheimer,
said the loan was clearly important for Jamaica, which has had
trouble accessing debt markets and has a high current account
deficit. But the government has a history of breaking its fiscal
promises in the face of outside shocks, such as storms,
commodity prices or weaker global growth.
"It's very difficult for any country to sustain primary
surpluses of that order of magnitude," he said. "I think it's
not going to be easy."