At the beginning of this month, the Executive Board of the International Monetary Fund (IMF) approved new funding arrangements to help stabilize the Jamaican economy and put it on a path to economic growth. The negotiation of the funds, a so-called Extended Fund Facility (EFF) up to US$923M has taken an extended period, lasting from the period of the recent Jamaica Labour Party governments of Bruce Golding and Andrew Holness, to that of the People’s National Party government of present Prime Minister Portia Simpson-Miller.
In commenting on the grant of the funds, a high official of the IMF’s Executive Board reminded all who still needed to know that, “for the past three decades, Jamaica has suffered from very low growth, high public debt and serious social challenges,” the result of an “unsustainable debt burden, low competitiveness, a weak business climate, and lack of policy credibility.”
The interpretation of this stagnation of the economy has plagued the country since the last half of the decade of the 1970s under Michael Manley ‒ exempting a brief period of growth in the initial reign of Edward Seaga when the country benefited from the United States’ creation of the Caribbean Basin Initiative ‒ through the regime of PJ Patterson who was Prime Minister for fourteen years, then onto the brief recent Golding-Holness eras, and down to the present.
It is little wonder then that with such a record, there is some degree of scepticism both at home and abroad, as to whether the present arrangement which by all accounts, has placed a heavier burden on the Jamaican citizenry than any previous one, will have any positive effect.
The opposition Jamaica Labour Party finance spokesman, Audley Shaw, himself a recent Minister of Finance, has accused the government of deception in trying, according to him, to pretend that the government’s recent Budget, arranged to satisfy the conditions of the IMF, does not include the introduction of new taxes. And he insists that even the new agreement will not permit the availability of adequate foreign exchange to service the needs of the business class.
In somewhat similar vein, two noted institutional observers of these matters have, following the announcement of the IMF Executive Board commented somewhat discouragingly. Standard and Poors have asserted that meeting the targets set by the Fund “will be challenging” which, no doubt the government is well aware of. And the international ratings agency, Fitch, has similarly observed that the country is likely to “find it difficult to implement targets” set, given the country’s “erratic record in completing previous IMF programmes.”
But what, after an extremely prolonged period of negotiation, the whole country – government and opposition, businessmen and workers ‒ would appear to recognize on this occasion is, that there is now no feasible alternative available to the present arrangement. Further, they recognise that the ability to find a way out of the enduring difficulties no longer depends on the relative abilities of the two political parties which have dominated the scheme of things; and that some consensus towards supporting the implementation of the new programme is not a choice, but an unavoidable necessity. For Jamaicans, this present agreement would appear to be the end of the line, as far as IMF tolerance is concerned.
The IMF Executive Board has indeed insisted that the continuing connection between high public debt and consequent minimal resources to permit investment leading to sustained economic growth, must now be broken if what might be referred to as the ‘same old same old,’ problem now going into four decades is to be defeated. And in return, it would appear that the Fund has encouraged (to put it mildly) establishment of a committee involving government creditors, the trades unions and representatives of civil society whose own concurrence with the measures now required, will encourage concurrence and tolerance of the implementation of the new requirements by the wider society.
To that end, the Fund has noted the linkage between the new agreement and the concurrence of both the World Bank and the Inter-American Development Bank to find resources that can permit stabilization of the pressures likely to be placed on the lower sections of the society. At the same time, however, government will be required to maintain a floor on social spending which, over the years has been seen as an area of difficulty in terms of the keeping of financial commitments made.
The central impression gained from local comment on the new agreement would seem to be that of its unavoidable acceptability. The voices of dissent have been dimmed as the situation has seemed more and more desperate; and now both political parties have been sufficiently embroiled with the IMF and the related financial institutions, and the commitments that have been made to them over the years, that there is very little space for ‘political gallerying’ as has been practised in the past.
In Jamaica, times have apparently changed, as levels of tolerance have increased, at least among the decision-makers of the political and private sector spheres. Interestingly, in the mid-1970s, the IMF’s representative in Jamaica was a Trinidadian, Mr Ewart Williams, who subsequently became Governor of the Central Bank of Trinidad & Tobago, and who, at the time was heavily criticized. During the recent discussions, the Fund’s point man in the country was a St Lucian economist, Mr Gene Leon.
Perhaps it becomes easier over time, and as circumstances become more severe, to legitimize external advice to our countries coming through the voices of nationals of the region, uncomfortable as it might sometimes be for some critics. For ironically, we have consistently demanded that the international institutions employ more of our nationals in positions of decision-making significance relative to our countries.
It will not be long before we see whether Jamaica can hold to the present arrangements without renewed pressure on government, given the period in which a sustained commitment to the present agreement will have to be maintained.
As the Fund’s Mission Chief for Jamaica has observed in commenting on the new agreement, “the Fund has worked with Jamaica for many years, and the relationship has not been easy. We do recognise that the reputation and record of the fund in Jamaica remains subject to much debate and strong emotions.”
