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The Gleaner - December 2, 2000

 

FINSAC gets US$75M

FINSAC, THE Government's bail out agency for the financial sector, was itself partially bailed out on Thursday by the World Bank with a US$75 million loan.

The loan is the first phase of a US$150 million package to help FINSAC, the Financial Sector Adjustment Company, to strengthen the ailing sector.

"This is a substantial increase in the Bank's financial support to Jamaica," said Orsalia Kalantzopoulos, country director for the World Bank's Caribbean department. "It comes in recognition of Jamaica's satisfactory implementation of World Bank projects and the Government's impressive efforts to adhere to a sound macroeconomic framework."

World Bank support to Jamaica from fiscal years 1993 to 1997 averaged US$51 million per year. The Bank said the latest package was part of a new two-year Country Assistance Strategy which was also presented to its Board on Thursday.

The strategy covers the period through June 2002, and proposes to lend up to US$220 million to strengthen the financial sector and to invest in poverty-reducing social programmes in Jamaica.

"The $75 million loan will help create the conditions for economic growth in Jamaica by supporting financial sector restructuring and improved public debt management," the World Bank said.

On Tuesday, Finance Minister Dr. Omar Davies said he had already received the first US$75 million tranche of a similar US$150 million FINSAC package from the Inter American Development Bank (IDB).

He told the House of Representatives that "these resources would be used to retire some of the FINSAC bonds which have been used to address the solvency problems of intervened institutions in particular Union Bank and NCB".

The World Bank's single-currency US-dollar loan has a fixed spread and will be repaid in 17 years, including a five-year grace period. Under the new country assistance strategy, in addition to the US$150 million of support for the bank restructuring and debt management programme, the World Bank also plans to provide US$70 million for social programmes aimed at strengthening the social safety net mechanisms and secondary education.

Furthermore, Jamaica will receive World Bank support to fight HIV/AIDS under a Caribbean HIV/AIDS initiative, which is expected to be presented to the Bank's Board in the summer of 2001.

The World Bank added that the country strategy also includes analytical and advisory services to support analyses of the sources of and constraints to growth in the Jamaican economy, as well as of the causes and consequences of poverty and other social challenges.

Assistance under the new programme will complement six ongoing World Bank projects in education, public sector modernisation, export development, and a social investment fund.

 

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