Verbatim from rating agency Moody’s on Jamaica, highlighting mine:

The IMF, which has been negotiating the terms of a $1.2 billion stand-by facility with Jamaica for several months, said on Friday after fund officials spent several days in Kingston, that discussions would continue in Washington next week. The focus, said the IMF, is “on how to reduce the large fiscal deficit and put the debt on a clear downward path.” There was no clarification with respect to the timing for finalizing the discussions.

A delay in reaching an agreement with the IMF could have potentially adverse credit consequences given Jamaica’s continued fiscal underperformance. An agreement with the IMF is crucial to provide essential multilateral funding to strengthen Jamaica’s external position, shore up confidence and meet financing obligations.

A sizeable fiscal adjustment required to stabilize debt dynamics is presenting a major challenge to the government as the majority of expenditures are devoted to wages – which have already been frozen – and interest payments while revenues are declining amid depressed economic activity. This year’s fiscal deficit is projected at 8.7% of GDP and public debt is expected to reach some 120% of GDP.

The government has repeatedly expressed its commitment to service its obligations in both local and foreign currency and has a long track record of timely debt service even during difficult times. However, Jamaica’s limited resources relative to the size of the public debt raise the possibility of a debt restructuring in order to place the government financial position on a sustainable path.

Jamaica’s B2 rating, among the lowest assigned by Moody’s to a sovereign nation, already reflects significant concerns about the government’s ability to honor obligations given its limited policy options to deal with the effects of the on-going economic downturn. High levels of public debt and vulnerability to interest and exchange rate movements limit the country’s flexibility in meeting these challenges.