Inter-American Development Bank president Luis Alberto Moreno leans in to hear Audley Shaw, minister of finance at the PSOJ Annual Economic Forum held at the Bank of Jamaica Auditorium in Kingston in May. The IDB says the loans to Jamaica are structured so as not to add to the country's debt load. - File

The Inter-American Development Bank (IDB) has been Jamaica's most significant multilateral investment partner.

In recent months, it has stepped up funding to the Government of Jamaica including the provision of a number of policy-based loans, budgetary support and other financing, for example, infrastructure and Air Jamaica's divestment.

According to IDB Jamaica's Country Representative, Gerard Johnson, at the end of December 2008 the IDB had disbursed approximately US$150 million to Jamaica, including some US$120 million for budgetary support.

On January 19, Jamaica will sign loan agreements with the bank for a further US$300 million, which will be available for disbursement shortly thereafter.

Supplemental loan

Included in the agreements is the US$14 million supplemental loan, which was approved in December 2008, to be used by the Ministry of Education to complete the civil works on the Primary Education Support Project (PESP), targeted at creating 4,935 new classroom places.

The agreement will also allow the shifting of an unused allocation of US$15 million from the National Water Commission to the Ministry of Labour and Social Security for welfare assistance under the Programme for Advancement through Health and Education.

This is perhaps the first time that a loan facility, which was previously approved for another project, has been withdrawn and offered to another Government entity.

This is an important development in keeping with what the IDB says is its position that lending to Jamaica at this time is not meant to lead to an increase in its overall public debt.

Rather, the current loan facilities should be used to replace existing debt obligations.

The debt stock stands at $1.04 trillion.

Just under $39 billion of that is owed to the IDB, representing 49 per cent of the country's total multilateral debt at March 31, 2008.

In February or March, the IDB expects to begin disbursing the US$200 million risk sharing guarantee facility to FirstCaribbean International Bank.

A further US$200 million to US$300 million is available for lending to the Government of Jamaica, during 2009, of which around US$170 million can be used for budgetary support.

It is also expected that during the upcoming fiscal year, 2009/10, Jamaica will draw down on the second phase of the policy based loans for:

(a) the Competitiveness Enhancement Programme (a further US$30 million); and

(b) the Public Financial and Performance Management Pro-gramme (another US$60 million).

Draw down those funds

Johnson, when asked about the status of a further draw-down for phase two of the PESP, which would amount to another US$30 million, said Jamaica has indicated that it would likely draw down those funds in the next calendar year, 2010.

Discussions are underway but nothing has been finalised on the possibility of further loans and grant facilities for Jamaica during the next fiscal year.

The IDB and the other multilateral lending agencies are taking seriously the stated commitments to fiscal discipline and targets that were presented by Finance Minister Audley Shaw and his team last November when they made the rounds with the various agencies.

This was the basis on which the IDB went ahead and made adjustments to its Jamaica Country Strategy.

Fiscal targets

In his meeting with Prime Minister Bruce Golding and/or other government officials on January 19, IDB President Luis Alberto Moreno is expected to underscore the importance of Jamaica meeting these fiscal targets in 2008/09 and going forward.

In other words, there is no wiggle room as a result of the current global financial crisis.

As a result, details of the upcoming tabling of the First Supplementary Estimates, 2008/09, by Shaw later this month will be a critical bellwether of the Govern-ment's ability to curtail expenditure and increase revenue sources for the rest of the fiscal year.

If the anticipated revenue receipts from the sugar and Air Jamaica divestment are not going to come through during the last quarter of this fiscal year, then Jamaica could see the curtailment/postponement of some other major big-ticket items such as the Mount Rosser/Spanish Town and Vineyards to Williams-field toll roads.

In this regard, an increase in the gas tax this year is not unlikely.

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