The IMF loan has a longer maturity — 20 years — and the low interest rate it is priced at, in an environment of rising borrowing costs globally, should help bring significant savings each year to the Government's coffers and in the process, free up funds that would have otherwise be used for interest payments to be spent on other things.
The funds, while not yet accessed, are now available after the IMF board expressed satisfaction with the progress that has been made to strengthen the country's resilience to the physical and fiscal impacts of climate change. It will be the first drawdown from the US$764-million facility which was entered into in March of this year. The country at that time also entered into an arrangement to have access to US$968 million under the Precautionary and Liquidity Line (PLL). The country now has access to US$611 million of that PLL fund but has indicated that it will continue to treat the loan as precautionary, meaning, the funds will only be accessed if needed. The PLL is to provide insurance against risks from higher commodity prices, a global slowdown, tighter-than-envisaged global financial conditions, and new COVID outbreaks. It too is a low-interest loan which is to be repaid over 20 years, if utilised, at low interest rates.
"Jamaica continues to make significant progress in strengthening its policy frameworks and implementing an ambitious climate policy agenda, supported by the Precautionary and Liquidity Line (PLL) and the Resilience and Sustainability Facility (RSF) arrangement," Antoinette Monsio Sayeh, deputy managing director and acting chair of the IMF Board, said in an issued statement.
"Entrenched macroeconomic stability and sound policy frameworks continue to support economic growth, allowing Jamaica to navigate a complex global environment. A large primary fiscal surplus continues to support a strong downward trajectory of public debt, the financial system remains well capitalised, liquid, and stable, and inflation is converging to the midpoint of the Bank of Jamaica's target band," Monsio Sayeh continued.
She also praised the progress made on the fiscal reform agenda, including the reform of the public sector wage structure which is intended to eliminate distortions in the salary scale and to retain skilled workers.
"The authorities are advancing their ambitious climate policy agenda to increase resilience to climate change and green the economy. Reforms include the adoption of a disaster risk financing policy, the addition of climate requirements to the framework for private-public partnerships, the approval of an electric vehicle policy and the issuance of guidelines for energy efficiency in public buildings, schools, and hospitals," the release added.
Still, amidst the praise, the IMF also pointed out that climate-oriented reforms of the fiscal framework, incentives for investments in renewables and the greening of the financial system can foster investor confidence and catalyse private climate financing to help the efforts.
Reforms made to strengthen the anti-money laundering/combating the financing of terrorism (AML/CFT) framework were also acknowledged, with the fund urging the authorities to now prove that the laws that were passed work as intended in line with international best practices.
"Moving forward, efforts should focus on demonstrating the AML/CFT framework's effectiveness in line with the action plan agreed with FATF," the IMF said. The country has to demonstrate that the measures work before the FATF will consider removing Jamaica from its grey list. The FATF grey list outlines the countries or jurisdictions that the FATF deems as 'jurisdictions under increased monitoring'. FATF is the Financial Action Task Force — the global money laundering and terrorist financing watchdog which sets international standards that aim to prevent these illegal activities and the harm they cause to society.
Nigel Clarke, Jamaica's minister of finance, responding to the IMF's push for the country to now demonstrate that the reforms work, outlined that the country is now at the tail end of that process.
"Jamaica has put in place a robust and appropriate legal framework that satisfies the revised FATF standards on the transparency and beneficial ownership of legal persons and arrangements, in keeping with our international obligations with the FATF. We achieved this through the passage and coming into force of several pieces of legislation over the past few years, and most recently the Companies Amendment Act (2023), which was passed on March 31, 2023 and came into effect on April 1, 2023, respectively," Clarke said.
"We are now at the stage, whereby, having successfully completed all the legislative requirements, we are well into the implementation phase which ought to demonstrate the effectiveness of Jamaica's AML/CFT regime. As such the GOJ is implementing all aspects of the new beneficial ownership framework; and completing implementation of the risk based supervision framework for (a) trust and (b) corporate service providers and lawyers.
"With the completion of these, Jamaica anticipates applying to exit the FATF increased monitoring process by the next plenary, scheduled for October 2023. If successful, FATF will schedule an on-site visit to confirm the sustainability of the measures Jamaica has taken to strengthen its AML/CFT framework."
If the FATF is satisfied after that visit, the hope is that Jamaica will be taken off the grey list early next year.
