Jamaica, IMF hold fresh talks on new loan agreement

KINGSTON: Officials from the International Monetary Fund have arrived in Jamaica to hold a new round of negotiations on a lending agreement the debt-ridden Caribbean country hopes will help steady its economy.

In a statement, Jamaica finance ministry spokeswoman Cheryl Smith said on Tuesday the government hopes the IMF mission will be a key step toward forging a new deal with the Washington-based lending agency.

"The mission follows extensive discussions by Jamaican officials with representatives of the IMF in Washington, D.C., and is pursuant to efforts to reach a staff level agreement regarding a Letter of Intent for Jamaica," the statement said.

"This will form the basis of Jamaica's submission to the IMF Board for approval of a four-year Extended Fund Facility at the earliest possible time," it said.

Talks have been ongoing for months as Jamaica - one of the world's most indebted nations - grapples with a growing debt burden, a drop in international reserves and a sharp slide in the Jamaican dollar.

Last month, Fitch Ratings agency said in a report that Jamaica's debt burden stood at 130 percent of gross domestic product and the economy contracted by an estimated 0.5 percent in 2012.

Fitch Ratings also downgraded Jamaica's economic outlook from stable to negative and said the country faced "serious financing constraints."

"The sustained erosion of the country's international liquidity position has sharply reduced the authorities' maneuver capacity to manage external and fiscal pressures, thereby increasing the urgency of reaching a new agreement with the IMF in the near term," it said.

During months of talks, the IMF has expressed concern over Jamaica's efforts at implementing tax and pension reform and called for spending cuts in the public sector.

The government is currently negotiating wages for state workers and Finance Minister Peter Phillips told reporters last month the talks would have to be completed before an agreement can be reached with the IMF.

A 27-month standby agreement worth $1.27 billion expired last May, although it effectively lapsed after the previous government was unable to meet performance targets set by the IMF.