Jamaica's IMF deal now very close
IN yesterday's special media briefing at Jamaica House, Finance Minister Peter Phillips stated that all the prior actions required by the International Monetary Fund (IMF) had now been completed.
These included the new policy severely limiting discretionary waivers, the passage of legislation managing the public debt, a wage-restraint agreement with the major unions covering at least 70 per cent of the public workforce (they are now over 80 per cent), and critically, achieving the full savings of 8.5 per cent of GDP from the National Debt Exchange (NDX) by 2020.
According to Phillips, responding to questions as to whether there had been a miscalculation of the interest savings from the NDX, he stated that the agreement with the IMF had been calculated on a 99.5 per cent acceptance rate of the National Debt Exchange, but the participation rate was only 98.8 per cent. The IMF had calculated the resulting shortfall in interest savings at 0.36 of one per cent of GDP, out of a total needed of 8.5 per cent of GDP over the period to 2020. This had required the Government to go back to the large financial institutions for additional savings, although he emphasised that this phase two was in keeping with a menu of options that had originally been agreed in the original negotiations with the financial sector. He added that, on March 22, eight key financial institutions : Bank of Nova Scotia, National Commercial Bank, Sagicor, Jamaica Money Market Brokers, Jamaica National Building Society, First Global, Victoria Mutual, and Guardian Life had voluntarily swapped an additional $20 billion in Jamaican-dollar denominated debt, and $51 million in US-dollar denominated debt, to allow the overall savings target to be met. For this act of enlightened self-interest, the minister added, Jamaica owed its appreciation to these institutions.
In response to a question as to whether he should tax or otherwise penalise the holdouts in the NDX, he said that they were a "mixed bag", including a lot of small holders like pensioners. After some thought, he had preferred to emphasise the "patriotic outpouring" that had "united us", as demonstrated by the extremely high-acceptance rate, particularly as a Government "threat" would not have solved the immediate problem, and they would still have been required to go to phase two.
The remaining issue now was the multilateral discussions between the IMF, IDB and World Bank about their relative commitments of cash to the overall programme, and the timing of those commitments. Jamaica was not involved directly in these discussions, which had been intense over the past three days, although we were in touch with all the multilaterals separately, and using all our diplomatic channels to call for a speedy resolution to what he described as "a matter of utmost urgency", as "we cannot countenance any lengthy delay and uncertainty". He expected the discussions to be finalised "soon", bearing in mind the budget debate starts on April 18, although he was not going to predict a date.
As far as the issue of new taxes in the current budget was concerned, the Minister said there was "no need to fear", as at most there would just be some rebalancing. In nominal terms the budget would increase, but in real terms, (after inflation) it would be a reduction, although efforts had been made to maintain commitments in education, health, social protection, and particularly children's services.
Finally, in response to a question as to whether any solution similar to what had occurred in Cyprus had been contemplated at any time, Minister Phillips advised "absolutely, emphatically, definitively no".