IMF finalizing deal with Jamaica on $1.3 bln loan

WASHINGTON, Dec 17 (Reuters) - The International Monetary Fund said on Thursday it had reached agreement with Jamaica on key elements of a $1.3 billion loan, and its executive board may consider it early next year. Trevor Alleyne, the IMF's mission chief to Jamaica, said the 27-month IMF-backed loan program may include measures to control public sector salaries and increase taxes. "We will remain in close contact with the authorities over the coming days as they finalize their economic program in a letter of intent, which would then be reviewed by IMF management," Alleyne said in a statement. Jamaican Prime Minister Bruce Golding earlier this week had said that the loan terms included "harsh conditions" that would require imposing new taxes and cutting government jobs. Spelling out some of those conditions, Jamaican Finance Minister Audley Shaw on Thursday said the government would hike the Caribbean nation's value added tax on goods and services by 1 percent, to 17.5 percent, effective Jan. 1. Some basic food items exempted from the value added tax will now be included, Shaw said, adding there will also be increased levies on fuel, cigarettes and electricity. "With or without the IMF, we would continue to puruse this program of economic repositioning, for it is critical to our nation's economic survival and prosperity," Shaw told Parliament. Under the current timetable, the IMF's executive board is expected to consider the $1.3 billion loan early in 2010. Alleyne said the program's main goal was to address the country's economic imbalances and put Jamaica on a path of sustainable growth. Although the program involves spending cuts and tax hikes, it also allows for an increase in social safety net spending to protect the most vulnerable, he said. Jamaica's economy has been hard hit by the global recession which curbed tourism and dented demand for bauxite and alumina, a key export. Golding said on Thursday that the government was seeking to sell its stake in the only bauxite and alumina company still operating in Jamaica. The government is a partner in Clarendon Alumina Products, also known as Jamalco, with Alcoa Inc , which owns 55 percent of the shares. "We are pursuing options to divest the shares that the government has in Clarendon Alumina Products," Golding said.