Jamaica will receive a loan for $750 million from the International Monetary Fund, provided the country can develop a significant plan for economic reforms to reduce the national debt. That plan would include convincing private sector lenders to agree to more lenient terms for the country’s existing debt, along with efforts from government officials to find new ways to reduce spending and adjust taxes. Jamaica’s debt is 40 percent higher than its gross domestic product, one of the worst margins in the world.
“Over the last three decades, the Jamaican economy has experienced very low economic growth, declining productivity, and reduced international competitiveness,” Jan Kees Martijn, the head of the IMF’s mission to Jamaica, said according to the BBC.
“An important factor behind these problems has been Jamaica’s unsustainable debt burden, which has undermined confidence and elevated risks to the economic stability.”
The IMF’s executive board will review Jamaica’s reform efforts before making a final decision on the loan in March. More than half of the government’s spending is used to pay down the national debt, leaving just a small percentage left for the Jamaican people after administrative costs and wages are taken out. The IMF wants the country to re-negotiate the terms of outstanding debt with private lenders to reduce the amount of interest being added to the debt each year.
With the backing of the IMF, Jamaica may win additional faith from its lenders that the money borrowed towards the debt will eventually be paid back. The IMF loan would last four years, and could also open up opportunities for additional private loans. There are some critics within Jamaica that believe the terms of the loan should be debated before the government acts to meet the IMF’s demands.