TNAG-1942-FCO40-2768-Internal-economic-situation-in-Hong-Kong-1989 — Page 104

Jamaica

CONFIDENTIAL

Xvi

52 General elections are constitutionally due by Spring 1989 but a date is expected

soon. Recent polls point to a victory for Mr Manley's PNP. A Manley

Adminstration would lengthen the odds against eventual economic recovery (and

repayment of debts to the UK) and possibly strengthen the Jamaican links with Cuba

and the Soviet Bloc.

53 The devastation caused by Hurricane Gilbert in mid-September had severely

damaged economic prospects in the short-term. Aid commitments of some $520mn have

been received so far (although much of this represents the re-allocation of existing

Emergency assistance will also be provided by the Fund, IBRD and

Prior to the hurricane the domestic economy had been performing well.

commitments).

IADB.

54 Although the Fund Board approved a new 14-month SBA on 19 September the

programme's targets and performance criteria will have to be amended. A new Paris

Club agreement was reached in October which rescheduled all principal and interest

payments (including PRD) due June 1988-November 1989 over 10 years/5 grace. Debt

due to banks is covered by last year's MYRA but Jamaica is to request a reduction in

spreads to 0.875% from 1.25% over LIBOR.

Panama

55 US trade sanctions and the lack of overseas confidence continue to have a large

impact on the domestic economy and the offshore centre. Offshore deposits have

fallen 55% since end-1987, real GDP is expected to fall by nearly 20% this year and

the fiscal deficit is expected to reach 9% of GDP. The reserves of Banco Nacional

(the largest Panamanian bank) have dwindled to a few million dollars. Debt service

payments to all creditors remain suspended and arrears of interest and principal

(including amounts due to IFIs) are expected to reach $1.3bn by end-1988.

Costa Rica

56 In September Costa Rica failed to reach agreement with the Paris Club.

Negotiations with the commercial banks have also made little progress since

mid-August: a further meeting is planned for 30 November. Taiwan has offered to

finance the purchase of 40% of debt owed to foreign banks, to be paid off with a

soft loan of $300-400mn; in return Taiwan would obtain certain trade (mainly

fishing) benefits. The IBRD Board is considering a SAL of $100 mn.