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Sabrina Gordon, Business Reporter
Finance Minister Audley Shaw says Jamaica is planning to return the bailout funds it got from the International Monetary Fund (IMF) as he moves to re-engineer the debt-servicing bill on padded foreign reserves.
He gave few specifics about the plan - telling Sunday Business that he would be guided by the central bank on how the give-back would be executed - or whether the targeted funds involved the untapped capital initially earmarked for rescuing financial companies and banks that were later added to the country's reserves.
The finance minister, who initially raised the issue at a forum in King-ston, said Jamaica's macro-economic indicators were looking favourable, but he also said that the give-back did not change the plan to seek an extension of the current IMF agreement.
stable economy
"The economy is stable. The exchange rate is stable. Foreign exchange is not in short supply. Both the net international reserves and the gross reserve are at record high to the point that we are now contemplating that of the funds we have received from the International Monetary Fund," he said Thursday at a small-business mingle.
"We are contemplating saying to the IMF we want to give back some of that money to you because we really don't need that money, and keeping that money in the reserves is costing us. We are saying that we have kept the fiscal situation so tight and so disciplined that we are in a position to say to the IMF, take back some of the money."
The net reserves stood at US$2.3 billion at the end of May. But Shaw also side-stepped answering how much would be returned.
"I would not know that now and would have to be advised by the Bank of Jamaica," he told Sunday Business.
The announcement comes amid speculation that Jamaica might have failed the December-quarter test, whose results are still pending, but this has been denied by Shaw, while IMF representatives in Jamaica have said they would offer no specific comments ahead of the IMF's board review.
In February 2010, the IMF approved a 27-month standby arrangement with Jamaica, which included borrowings of US$1.3 billion and the Financial Sector Support Fund (FSSF) of US$950 million.
The FSSF was seeded by the IMF's US$450 million, IDB US$300 million, and World Bank US$200 million, and the resources were distributed upfront.
economic reforms
Jamaica entered the arrangement seeking support for the country's economic reforms to bolster its balance and payments and temper the effects of the global economic meltdown. Some of the funds were also for budgetary support.
So far, Jamaica has received total disbursements of SDR 541.8 million, or about US$838.2 million, at the end of the third review covering the three-month period to September 2010.
At that time, the IMF reported that Jamaica had performed creditably under the programme.
The results of the combined fourth and fifth reviews are outstanding. Shaw said the delay was related to the public sector wage-settlement negotiations.
"We are dealing now with the arrangements that are in place. Once we settle the seven per cent and settle the arrears, which is one of the reasons why there is a protracted delay even in the IMF review," said Shaw.
"The IMF review cannot be completed until the issue of the public sector wages is dealt with. We are talking about a J$30-billion bill, so we have to settle that conclusively before we can finalise the review that is under way by the IMF," he said.
The successful conclusion of the fourth and fifth reviews of the IMF quarterly test would see the country drawing down an additional SDR 158.9 million.
The arrangement with the multilateral institution expires in May 2012, but Shaw said the extension of the agreement is still on the table for discussion.
"Giving back IMF money doesn't mean that we shouldn't stick within a tight fiscal framework because you want to do that to build confidence, so that the private sector feels confident. So even if we don't use the IMF money, we can abide by the rules of fiscal prudence with them," said the finance minister.
"That would be the argument to staying with the programme," said Shaw.
sabrina.gordon@gleanerjm.com
Finance Minister Audley Shaw says Jamaica is planning to return the bailout funds it got from the International Monetary Fund (IMF) as he moves to re-engineer the debt-servicing bill on padded foreign reserves.
He gave few specifics about the plan - telling Sunday Business that he would be guided by the central bank on how the give-back would be executed - or whether the targeted funds involved the untapped capital initially earmarked for rescuing financial companies and banks that were later added to the country's reserves.
The finance minister, who initially raised the issue at a forum in King-ston, said Jamaica's macro-economic indicators were looking favourable, but he also said that the give-back did not change the plan to seek an extension of the current IMF agreement.
stable economy
"The economy is stable. The exchange rate is stable. Foreign exchange is not in short supply. Both the net international reserves and the gross reserve are at record high to the point that we are now contemplating that of the funds we have received from the International Monetary Fund," he said Thursday at a small-business mingle.
"We are contemplating saying to the IMF we want to give back some of that money to you because we really don't need that money, and keeping that money in the reserves is costing us. We are saying that we have kept the fiscal situation so tight and so disciplined that we are in a position to say to the IMF, take back some of the money."
The net reserves stood at US$2.3 billion at the end of May. But Shaw also side-stepped answering how much would be returned.
"I would not know that now and would have to be advised by the Bank of Jamaica," he told Sunday Business.
The announcement comes amid speculation that Jamaica might have failed the December-quarter test, whose results are still pending, but this has been denied by Shaw, while IMF representatives in Jamaica have said they would offer no specific comments ahead of the IMF's board review.
In February 2010, the IMF approved a 27-month standby arrangement with Jamaica, which included borrowings of US$1.3 billion and the Financial Sector Support Fund (FSSF) of US$950 million.
The FSSF was seeded by the IMF's US$450 million, IDB US$300 million, and World Bank US$200 million, and the resources were distributed upfront.
economic reforms
Jamaica entered the arrangement seeking support for the country's economic reforms to bolster its balance and payments and temper the effects of the global economic meltdown. Some of the funds were also for budgetary support.
So far, Jamaica has received total disbursements of SDR 541.8 million, or about US$838.2 million, at the end of the third review covering the three-month period to September 2010.
At that time, the IMF reported that Jamaica had performed creditably under the programme.
The results of the combined fourth and fifth reviews are outstanding. Shaw said the delay was related to the public sector wage-settlement negotiations.
"We are dealing now with the arrangements that are in place. Once we settle the seven per cent and settle the arrears, which is one of the reasons why there is a protracted delay even in the IMF review," said Shaw.
"The IMF review cannot be completed until the issue of the public sector wages is dealt with. We are talking about a J$30-billion bill, so we have to settle that conclusively before we can finalise the review that is under way by the IMF," he said.
The successful conclusion of the fourth and fifth reviews of the IMF quarterly test would see the country drawing down an additional SDR 158.9 million.
The arrangement with the multilateral institution expires in May 2012, but Shaw said the extension of the agreement is still on the table for discussion.
"Giving back IMF money doesn't mean that we shouldn't stick within a tight fiscal framework because you want to do that to build confidence, so that the private sector feels confident. So even if we don't use the IMF money, we can abide by the rules of fiscal prudence with them," said the finance minister.
"That would be the argument to staying with the programme," said Shaw.
sabrina.gordon@gleanerjm.com