The International Monetary Fund has approved a US$1.25 billion loan to support Jamaica’s economic reforms and help the country cope with the consequences of the global financial crisis, Trevor Alleyne, the IMF’s mission chief to the island announced in Washington, Thursday.
Alleyne said the executive board approved the loan Thursday and the period to be covered is 27 months going through to the end of Fiscal Year 2011, 2012.
“Importantly, half of the funds will be distributed up front, which means today or in the next week,” he added.
The country’s return to the Fund for support has stirred controversy on the island with many remembering harsh encounters with balance of payments support packages in the 1970s and 80s under then prime ministers Michael Manley and Edward Seaga, that resulted in severe cuts in social services and public sector jobs.
This time round, Prime Minister Bruce Golding is facing the prospects of opposition from working people who fear loss of jobs and services and some members of the business sector who contend that the package rides on the back of a lowering of the country’s global economic ranking after the prime minister negotiated lowering of interest on existing loans – a measure seen as reneging on debt repayment.
Another unpopular condition of the agreement is the divestment of the perennially loss making and debt burdened state owned national airline, Air Jamaica. While Golding has announced an agreement in principle to merge the carrier with Caribbean Community partner Trinidad and Tobago’s Caribbean Airlines, it’s unclear whether the move critics say this is selling the national patrimony, has been consummated.
The union representing airline pilots, who have made a counter offer has threatened industrial action if the deal is sealed.
“The government wanted to make sure that this program tackled deep seated underlying vulnerabilities and problems facing the economy that have been at the root cause of Jamaica’s low growth experience over the past 10 to 15 years,” Alleyne said. “Therefore, the program does include a number of structural reforms, both in terms of making sure that the debt is now put on a sustainable footing and the financial sector is strengthened so that we create the conditions for much stronger growth in a sustained fashion going forward.”
Alleyne said that for this year – 2009-2010 – growth is projected to decline by about 3.5 percent, “but for 2010-2011, growth is supposed to turn positive half a percent, which is not anything to be comfortable with. But I think what we’re seeing is that we expect the economy to turn and thereafter to strengthen going into 2011 and 2012 and into the medium term.”
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