Jamaica Ramps Up Social And Economic Support In COVID-19 Response

IMF COUNTRY FOCUS

The COVID-19 cri­sis is hav­ing a sig­nif­i­cant impact on Jamaica. The pan­dem­ic, which is severe­ly hurt­ing tourism and remit­tances, reached the Caribbean coun­try just a few months after the suc­cess­ful con­clu­sion of its eco­nom­ic reform pro­gram — which was sup­port­ed by a $1.66 bil­lion Stand-By Arrangement from the IMF.


In response, the gov­ern­ment has ramped up its recov­ery efforts and estab­lished a spe­cial task force to effec­tive­ly respond to the eco­nom­ic impact of the cri­sis. In this con­text, Jamaica has also request­ed emer­gency financ­ing from the IMF in the amount of $520 mil­lion.
In an inter­view with IMF Country Focus, Jamaica’s Minister of Finance and the Public Service, Nigel Clarke, explains what mea­sures the coun­try is tak­ing to pro­tect lives and liveli­hoods from the impact of the pan­dem­ic.

What has been the eco­nom­ic impact of COVID-19 on Jamaica?

As with most economies around the world, the Jamaican econ­o­my has been sig­nif­i­cant­ly impact­ed by the effects of the COVID-19 pan­dem­ic. The econ­o­my is expect­ed to con­tract by over 5 per­cent this fis­cal year. Furthermore, gov­ern­ment rev­enues are expect­ed to decline by dou­ble dig­its even as emer­gency health expen­di­tures, as well as social and eco­nom­ic sup­port expen­di­tures, rise. Our bal­ance of pay­ments will also be neg­a­tive­ly impact­ed by our con­sid­er­ably low­er inflows from tourism and remit­tances, which pri­or to the pan­dem­ic rep­re­sent­ed approx­i­mate­ly 20 and 15 per­cent of GDP, respec­tive­ly. As such, the COVID-19 pan­dem­ic is hav­ing a mul­ti-dimen­sion­al impact.

What eco­nom­ic mea­sures has Jamaica tak­en so far to com­bat the effects of the pan­dem­ic?

As with most economies around the world, the Jamaican econ­o­my has been sig­nif­i­cant­ly impact­ed by the effects of the COVID-19 pan­dem­ic. The econ­o­my is expect­ed to con­tract by over 5 per­cent this fis­cal year. Furthermore, gov­ern­ment rev­enues are expect­ed to decline by dou­ble dig­its even as emer­gency health expen­di­tures, as well as social and eco­nom­ic sup­port expen­di­tures, rise. Our bal­ance of pay­ments will also be neg­a­tive­ly impact­ed by our con­sid­er­ably low­er inflows from tourism and remit­tances, which pri­or to the pan­dem­ic rep­re­sent­ed approx­i­mate­ly 20 and 15 per­cent of GDP, respec­tive­ly. As such, the COVID-19 pan­dem­ic is hav­ing a mul­ti-dimen­sion­al impact.

What eco­nom­ic mea­sures has Jamaica tak­en so far to com­bat the effects of the pan­dem­ic?

The gov­ern­ment imple­ment­ed a social and eco­nom­ic sup­port pro­gram called the CARE Programme, which pro­vides assis­tance to vul­ner­a­ble indi­vid­u­als and small busi­ness­es through inno­v­a­tive and exist­ing deliv­ery chan­nels.

More specif­i­cal­ly, the pro­gram pro­vides:

  • com­pas­sion­ate grants to those who were unem­ployed or infor­mal­ly employed pre-pan­dem­ic;
  • tem­po­rary unem­ploy­ment ben­e­fits to the pre­vi­ous­ly employed who have been laid off or ter­mi­nat­ed since the pan­dem­ic; and
  • grants to the self-employed whose reg­u­lar earn­ings have been dis­rupt­ed in addi­tion to grants to small busi­ness­es.

The CARE Programme also incen­tivizes employ­ers in tar­get­ed sec­tors to remain con­nect­ed to their employ­ees. Transfers are made to busi­ness­es that retain employ­ees (who are below a par­tic­u­lar income lev­el) on their pay­roll. Among oth­er mea­sures, the CARE Programme pro­vides sup­port for the sick, the elder­ly, the dis­abled, and those who were eco­nom­i­cal­ly vul­ner­a­ble pre-pan­dem­ic by sup­ple­ment­ing exist­ing pro­grams.
In addi­tion, we have sup­port­ed new health expen­di­tures. The fis­cal year 202021 bud­get is being adjust­ed to accom­mo­date low­er rev­enues, new expen­di­tures, re-pri­or­i­tiz­ing of pre­vi­ous­ly planned expen­di­tures, and uti­liza­tion of cash resources.

It is also worth not­ing that, even dur­ing these unprece­dent­ed times, the gov­ern­ment has tak­en, and will con­tin­ue to take, steps to ensure trans­paren­cy and good gov­er­nance in spend­ing and pro­cure­ment asso­ci­at­ed with our COVID-19 pol­i­cy respons­es. For exam­ple, we plan to pub­lish key infor­ma­tion on pro­cure­ment con­tracts and, as we have already done with the CARE Programme, will request that the Auditor General’s Department under­take and pub­lish an audit of COVID-19 relat­ed spend­ing.

Jamaica’s strong own­er­ship through­out its eco­nom­ic pro­gram and track record imple­ment­ing reforms result­ed in a stronger and more resilient econ­o­my. How have these reforms helped dur­ing this chal­leng­ing time?

The most obvi­ous way is that we have encoun­tered the pan­dem­ic with sig­nif­i­cant­ly low­er debt than we had when we entered the glob­al finan­cial cri­sis ten years ago. This has pro­vid­ed some flex­i­bil­i­ty.

In addi­tion, we had accu­mu­lat­ed cash resources of over 3 per­cent of GDP through pub­lic body reform, inclu­sive of divest­ment of state enter­pris­es, and fis­cal over-per­for­mance. We were plan­ning to use these resources to accel­er­ate debt repay­ment.

Due to the COVID-19 pan­dem­ic, how­ev­er, we will instead need to draw down on these resources to assist in financ­ing bud­getary expen­di­tures in light of the decline in rev­enues and the new emer­gency expen­di­tures that have arisen. The reforms that gave rise to these cash resources have put Jamaica in a much stronger posi­tion with a wider pool of options.

Finally, Jamaica’s mon­e­tary pol­i­cy frame­work was strength­ened over the course of the Stand-By Arrangement with price sta­bil­i­ty becom­ing the cen­tral goal of mon­e­tary pol­i­cy under a flex­i­ble exchange rate régime. This allowed for sig­nif­i­cant reserve accu­mu­la­tion with non-bor­rowed net inter­na­tion­al reserves increased by over $1 bil­lion. Work con­tin­ues to fur­ther devel­op for­eign exchange and debt mar­kets, which will be crit­i­cal in sus­tain­ing effi­cient inter­me­di­a­tion of cap­i­tal to sup­port increased invest­ment in Jamaica.

How has the ongo­ing work in devel­op­ing the Natural Disaster Risk Management pol­i­cy frame­work helped in respond­ing to the COVID-19 shock?

We made a his­toric trans­fer to our Natural Disaster Contingencies Fund, which was cre­at­ed to pro­vide for unfore­seen dis­as­ter-relat­ed expen­di­tures of any kind two fis­cal years ago. We were able to draw down from this con­tin­gency to finance some of the emer­gency social spend­ing.

It was extreme­ly use­ful to have this option. The amount drawn will be replaced as part of the appro­pri­a­tion process. However, we would not have been able to respond to the COVID-19 relat­ed emer­gen­cies as quick­ly and as nim­bly as we did with­out the resources avail­able in the Natural Disaster Contingencies Fund.

How will Jamaica make use of the emer­gency assis­tance from the Rapid Financing Instrument?

Given the severe shock from the pan­dem­ic, the pro­ceeds of the Rapid Financing Instrument will be used to strength­en the reserves at the Bank of Jamaica. As of now, we do not need the financ­ing facil­i­ty for bud­getary sup­port. We are using our own cash resources and oth­er pro­grammed bud­getary inflows.