The COVID-19 pandemic is hurting Jamaica’s tourism industry (photo: Debbie Ann Powell/iStock)
Jamaica Ramps Up Social and Economic Support in COVID-19 Response
May 28, 2020
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.
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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?
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
2020/21 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.
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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 regime. This allowed for significant reserve accumulation
with non-borrowed net international reserves increasing by over $1 billion.
Work continues to further develop foreign exchange and debt markets, which
will be critical in sustaining an 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.
