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IMF Special Report

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IMF Frequently Asked Questions

1. What is Jamaica's latest deal with the IMF?

On May 1, 2013 the Jamaican government and the IMF came to an agreement for SDR 615.38 million or US$932.3 million dollars under a four- year Extended Fund Facility (EFF). This facility was established to address medium- and longer-term balance of payments problems reflecting extensive distortions that require fundamental economic reforms.

Facility Arrangement Started Arrangement Expires Amount SDR millions Withdrawn SDR millions Outstanding SDR millions
Extended Fund Facility  May 1, 2013 Apr 30, 2017 615.38 417.13 417.13

2. What is Jamaica expected to do under this agreement? 

Jamaica’s May 1, 2013 deal with the IMF is a four-year Extended Fund Facility Loan created to support the government’s fiscal reform agenda. The plan is predicated on time bound fiscal consolidation and structural reforms. There are four types of conditions under an IMF program: prior action, quantitative performance criteria, indicative targets and structural benchmarks. 

Prior Action 

Prior action refers to the conditions that the Government of Jamaica agreed to complete prior to the approval of the EFF. These were:

1. Cabinet to adopt a decision to:

  • Cease the granting of discretionary waivers, excluding:

(i) those granted to charitable organizations and for charitable purposes

 (ii) those required to satisfy the GoJ’s already existing contractual or legal obligations

 (iii) waivers up to a ‘de minimis’ cap of J$10 million per month (for any that are not covered by the exceptions under (i) or specifically exempted in the Technical Memorandum of Understanding).

  • Cap total discretionary waivers, excluding those for charity, at J$80 million per month. Waivers for charitable purposed capped at J$250 million on a monthly basis.
  • Not approve any new waivers or renew any waiver category (unless required under existing legislation) or other tax incentive and not to amend existing legislation to generate further tax expenditures until the Omnibus Incentive Law comes into effect.

2.  Public sector wages:

  • Reach an agreement with major public sector unions limiting nominal wage increases to zero for FY 2012/13 and limiting merit increases to no more than 2.5 percent
  • Limit annual average increases including merit based to no more than 5 percent in the two subsequent years.

3. Public debt management: 

  • Approval by parliament of the Public Debt Law, to consolidate debt related acts and strengthen debt management.
  • Government to complete a debt exchange for domestic government bonds consistent with a reduction     in the public debt-to-GDP ratio by 2020 equivalent to at least 8.5 percent of GDP.

Quantitative Performance Criteria (QPC)

QPCs are specfic and measurable targets on key macroeconomic variables. QPCs must be met in order to complete a review. If not met, the IMF Executive Board may approve a formal waiver to allow for completition of the review. Such a waiver is granted if the Board deems the failure temporary, minor or if corrective action is being implemented by the governmnet in question. Jamaica's QPCs for its latest IMF deal are: 

  1. Primary Surplus Target- Meeting a central government primary surplus of 7.5% of GDP by FY 2013/2014
  2. Balanced Public Sector Budget- Fostering a balanced budget for public entities by FY 2013/2014 and thereafter throughout the program’s duration
  3. Reduced Public Sector Wage Bill- Facilitating a reduction in the public sector wage bill to 9% of GDP by FY 2015/2016
  4. Reduced debt/GDP ratio- A debt/GDP ratio of no more than 100 per cent by FY 2015/16.
  5. Non-accumulation of External Debt- The consolidated government and the BOJ should accumulate no external debt payment arrears (late by more than 7 days) during the programme period.
  6. Social Spending Floor- This target creates a minimum amount that the GoJ must spend on social protection initiatives and programs. 
  7. Direct Debt Ceiling- A target set on the maximum stock of direct debt that the central government can accumulate. For this purpose, central government debt is all forms of internal and external bonds and other forms of debt excluding debt owed to the IMF.  
  8. Guaranteed Debt Ceiling- A target for the maximum net increase in central government guaranteed debt allowed.
  9. Domestic Arrears Ceiling- This target sets as a maximum amount on the domestic arrears the central government is allowed to accumulate. Domestic arrears are defined as payments to residents determined by contractual obligations that remain unpaid 90 days after the due date. 
  10. Net Domestic Assets Ceiling- This target creates a maximum amount that cannot be exceeded for the cumulative change in net domestic assets for the period.
  11. Net International Reserves Floor- This target dictates a floor on the cumulative change in Bank of Jamaica net international reserves. Net international reserves of the BOJ are defined as the U.S. dollar value of gross foreign assets of the BOJ minus gross foreign liabilities with maturity of less than one year. 

Beyond 2015/16, these targets are to be maintained or—in particular, for the debt ratio—to be improved further. The long run objective is to reduce the debt ratios of the government to around 60 per cent of GDP.

Structural Benchmarks

1. Tax Reforms 

  • ‚ÄčGovernment to implement the Cabinet decision regarding taxes described in the prior action section 
  • The Government of Jamaica to table a Charities Bill, and Omnibus Tax Incentive Act in the House of Representatives
  • Broadening of the GCT tax base 
  • Increase in property taxes 
  • Amend the Revenue Administration Act to (i) provide access to third-party information  (ii) empower the the TAJ to require mandatory-filing for groups of taxpayers and/or types of taxes 
  • Increase the professional staff of Large Taxpayer Office (LTO) to 120 members.

2. Fiscal reforms 

  • Tabling in Parliament a budget in line with program commitment. 
  • Introduction of a Public Sector Investment Program (PSIP), beginning FY2013/14 and updated on an annual basis.April 30, 20133.
  • Adoption of a legally binding fiscal rule to ensure a sustainable budgetary balance starting with the 2014/15 budget.
  • Finalization of a review of public sector employment and remuneration that serves to inform policy reform. 
  • Divestment of Clarendon Alumina Production Limited (CAP) or implementation of a lease agreement.

3. Financial Sector Reform 

  • Establishment of a Central Collateral Registry, to reduce risk of loan default and increase access to domestic credit 
  • Implementation of a legal and regulatory framework conducive to Collective Investment Schemes in consultation with Fund staff.
  • Legislative changes regarding unlawful financial cooperations
  • Establishment of a distinct treatement for repo retail clients in a legal and regulatory framework
  • Enactment of Omnibus Banking Law consistent with Fund Staff advice to facilitate effective supervision of financial sector

3. What is Jamaica’s current status with the IMF? 

As Jamaica has passed all 8 IMF tests thus far, the nation is in good standing with the organization. Of the 615.38 SDR/ US$932.3 million approved in May 2013, the IMF disbursed US$207.2 million to Jamaica at the time of the deal. Since then the nation has received additional disbursements bringing the total amount withdrawn to US$625.5 million.

4. Why do IMF tests matter?

As the IMF distributes the loan in increments, Jamaica must pass IMF tests to remain qualified to receive the full monetary benefit of the 2013 EFF deal. Each time Jamaica passes a test, another portion of the loan becomes available to the government for withdrawal. According to the IMF's website "IMF resources are usually released in phased installments as the program is implemented".

5. How many more tests do we have and when are they?

Jamaica has passed eight tests so far:

  • September 30, 2013
  • December 18, 2013
  • March 15, 2014
  • June 15, 2014
  • September 15, 2014
  • December 15, 2014
  • March 15, 2015
  • June 15, 2015

Jamaica’s upcoming tests are on:

  • September 15, 2015 
  • December 15, 2015
  • March 15, 2015
  • June 15, 2016
  • September 15, 2016
  • December 15, 2016
  • March 15, 2017

6. What is EPOC?

EPOC stands for Economic Programme Oversight Committee. The committee consists of persons from the private sector, the public sector and civil society, who will receive and review information from the GoJ on the progress of the implementation of the Memorandum of Economic and Finacial Policies (MEEP) over the life of the IMF's Extended Fund Facility (EFF). The EPOC will also assist in ensuring that the agreed targets are achieved and advise the public through the media of any concerns or developments.
 

7. How can we read the EPOC updates?

You can read EPOC updates here at diGJamaica.

8. How long has Jamaica had a borrowing relationship with the IMF?

Jamaica became a member of the IMF on February 21, 1963. Read more here.

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