IMF endorses second debt exchange programme

Monique Grange, Assistant News Editor
The Gleaner/Power 106 News Centre

The International Monetary Fund (IMF) has welcomed the second round of a debt exchange programme which was announced by the government last night.

The Government is seeking a four-year extended fund facility with the IMF in an effort to reduce the country’s debt which now stands at $1.7 trillion.

In a release issued this morning, Head of the IMF mission to Jamaica, Jan Kees Martijn noted that one of the factors hindering Jamaica’s economic growth is the country’s unsustainable debt burden.

In reacting to the National Debt Exchange Programme, Martijn noted that Jamaica’s enormous debt has led to declining productivity and reduced international competitiveness over the last three decades.

He also pointed to the country’s high debt service which he says has limited the government’s potential to provide the services required to achieve sustained rates of growth and increased welfare for citizens.

However, the IMF mission chief informed that the Fund has been working closely with the government and its advisors in exploring policy options that can help achieve a substantial reduction in debt, while promoting sustained growth.

Martijn said the IMF continues to work assiduously with Jamaican authorities on an economic program that can help address the challenges facing the government.

He noted that the lending agency has also made significant progress in reaching key understandings on strengthening macroeconomic policies, on structural reforms and on social protection for the most vulnerable.

However, he stressed that it will be necessary to reduce the country’s liability significantly to achieve those objectives.

Martijn added that the targeted reduction will require significant fiscal consolidation and that a successful debt exchange offer will also require participation from creditors to secure financing assurances for a Fund-supported program.

The Government is hoping to reduce the country’s debt by about $17 billion each year between now and 2020.

In the national broadcast last night, Simpson Miller noted that the National Debt Exchange offer is a critical component of an the IMF agreement and the government’s Debt Reduction Programme.

An IMF staff mission is now in the island to continue discussions with the government.

The team is scheduled to leave on Friday.

Meanwhile, Financial expert Ralston Hyman believes the debt exchange programme is likely to shrink the economy.

He says the economy will contract if bondholders are unable to meet their financial plans if they are asked to receive less returns on their investments.

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