WASHINGTON, September 8, 2011 —The World Bank Board of Directors approved today a US$100 million loan for Jamaica to support the government's reform program to enhance fiscal and debt sustainability. The initiative is part of a coordinated effort by the international financial institutions and development partners to help the Government of Jamaica sustain its long-term development agenda.
The Second Programmatic Fiscal Sustainability Development Policy Loan will support a series of measures to enhance fiscal and debt sustainability, increase the efficiency of financial management, and improve the effectiveness of the tax system.
"Jamaica is grateful for the World Bank’s continued support for the country's economic program," said Audley Shaw, Jamaica’s Minister of Finance, who welcomed the timing of the disbursement. "This loan will be used, in part, to strengthen tax administration, enhance public financial systems and improve the government's budget process - all special areas of focus for the Government of Jamaica now."
Jamaica’s macroeconomic policy environment has been substantially strengthened by the implementation of the Fiscal Responsibility Framework as well as the submission to Parliament of a new Public Debt Management Bill. In addition, a series of tax administration reforms are expected to improve revenue collection.
Specifically, the loan will support the following areas:
- Enhancing fiscal and debt sustainability. This component supports reforms to increase control on public spending and debt generation, and reduce the debt service burden while improving debt management.
- Increasing the efficiency of financial management and budget processes. This component supports reforms to increase the effectiveness of public spending through investment prioritization in the budgeting process.
- Reducing distortions and enhancing the efficiency of the tax system. This component includes reforms to limit the tax incentives and increase the uniformity of the tax code, improve client services for tax payers, broaden the tax base, and simplify tax payments.
“Despite the challenges created by the global crisis, Jamaica remains on the path to improving fiscal sustainability, reducing the debt overhang, and accelerating growth, while striving to maintain social spending to protect the most vulnerable groups,” said Françoise Clottes, World Bank Director for the Caribbean. “This will continue to be a challenging reform agenda in the medium-term,” she added.
This loan builds on the progress made under the World Bank’s US$100 million Fiscal and Debt Sustainability Development Policy Loan approved in January 2009 and the US$200 million First Programmatic Fiscal Sustainability Development Policy Loan approved in February 2010.
The policies supported by the World Bank are complemented by the 27-month IMF Standby Arrangement approved in February 2010 in the amount of US$1.27 billion, as well as by budgetary support from the Caribbean Development Bank, the European Union and the Inter-American Development Bank.
The new US$100 million commitment-linked loan with a fixed spread is payable in 18.5 years, including a 9.5-year grace period. The authorities chose a custom loan maturity profile consistent with the debt management objectives developed in the recent Medium-Term Debt Management Strategy.