Jamaica Get $1.27 Billion Loan

[ECO]

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The International Monetary Fund's executive board Thursday approved a $1.27 billion loan to Jamaica, opening the door for additional financing of more than $1 billion from other international financial institutions.

Jamaica gets immediate access to about $640 million of the 27-month stand-by arrangement, with some of the money expected to be used to create a financial stability support fund, the IMF said in a statement.

The loan deal follows the successful completion of the government's debt exchange totaling nearly $8 billion. The exchange, which was accepted by almost 95% of bondholders, will generate interest savings of at least 3% of gross domestic product, the fund said.

Takatoshi Kato, deputy managing director and acting chair of the board, said the exchange "has contributed to a more equitable sharing of the burden of the overall fiscal adjustment," while balancing the need for cash-flow savings with ensuring financial stability.

The IMF-supported program aims at returning public finances to a sustainable path, including by reducing the public sector fiscal balance by 5% of GDP in fiscal 2010. Along with tax and financial reforms, social spending will also be increased to protect the poor.