KINGSTON, Jamaica – The World Bank has commended the Government’s efforts to overcome the global recession and stabilise the economy, noting that the country must now look towards growth and development.
“Now that the Government has established a more stable macro framework, the private sector and the people will see the difference in the country,” said World Bank Lead Economist and Sector Leader for Poverty Reduction and Economic Management for the Caribbean, Dr. Auguste Kouame.
He was making a presentation entitled: ‘Jamaica and the World Bank’s Development Policy Loans: Transitioning from Global Recession and High Debt to Economic Growth’ on Wednesday (September 22) at the Mona School of Business, University of the West Indies campus.
Recently, the World Bank approved US$600 million in Development Policy Loans (DPLs) to Jamaica, one of the largest such loans to a country relative to the size of its gross domestic product (GDP). Jamaica has so far accessed US$300 million of the amount, which comprises US$100 million in January 2009 and another US$200 million in February 2010.
DPLs are designed primarily to help the country achieve sustainable poverty reduction. The loan funds are also used to support general budget financing and help to avoid the need for government to borrow heavily from commercial banks and the capital markets, which command higher interest rates.
They also aim to protect expenditures on critical social programmes such as the Programme for Advancement Through Health and Education (PATH); strengthen the tax administration and tax revenue generating capacity of the Government; as well as maintain a minimum level of public investment.
The World Bank is but one of the multilateral institutions, which provide “fiscal space” in support of the Government’s economic recovery programme, with the International Monetary Fund (IMF) focused on the critical objective of stabilising the macro-economy.
The objective of the programme is to deal with the high levels of public debt, the high deficit, low revenues and inefficient expenditure. According to the World Bank Executive, the Bank agrees with all the objectives and that for the most part these objectives have been achieved.
“Since the programme started, interest rates, at least the interest paid by the Government has come down very significantly. It is now seven or eight per cent on Treasury Bills. So, interest rates that the Government was paying on …on average for domestic debt came down from 19 and 20 per cent to eight per cent. Interest rates on external debt came down from nine to seven per cent. So these are significant reductions and in terms of the economy. This is very good progress,” Dr. Kouame explained.
He observed that Jamaica’s performance under the first “Programmatic Fiscal Sustainability DPL” had made it possible for the debt exchange without a drastic cut in critical and well targeted social expenditures; the achievement of increased fiscal discipline; and a reduction in the country’s debt service cost.
He said that the next steps will involve an assessment of the progress achieved and discussions with the Government with respect to the timing and policies to be supported by the second programmatic DPL.