Downside of the political squabbling over IMF deal
THERE’S only one downside to the political squabbling over the timing and cash inflows from a new agreement with the International Monetary Fund (IMF): Confidence in an already uncertain economic outlook can be further undermined, and implementation of the agreement could be more difficult.
Ahead of last Sunday’s annual conference of the Opposition Jamaica Labour Party (JLP), Audley Shaw launched the first salvo in the latest skirmish, claiming that a black market for US dollars was re-emerging; an agreement cannot happen by year-end; and it will yield only US$400 million left over from the US$1.2-billion in the previous agreement which collapsed under Mr Shaw’s watch as finance minister.
The JLP continued the barrage at their conference, with party leader Andrew Holness railing against the Government for the delay in getting a new agreement and vowing that the JLP would be a relentless critic of the Portia Simpson Miller Administration for its economic management and, more specifically, its handling of the IMF negotiations.
"Nobody is going to silence us from making our points in a significant way. I know the sensitive nature of the financial market, but I know the plight of the people," he declared. "As Opposition, we have a duty to protect Jamaica," he told Labourites at a scaled-down delegates conference at the Conference Centre in downtown Kingston.
Finance Minister Dr Peter Phillips rejected the assertion about the quantum of financial support the Government will get from the IMF in a new deal. There was "no foundation in fact" for Mr Shaw’s assertion because "we have not settled anything about the size of resources".
Nevertheless, in subsequent statements in Parliament and elsewhere, Mr Shaw has not resiled from the US$400- million figure or his view that an agreement will not be reached by year-end.
Dr Phillips responded that "significant progress" has been made in the discussions; the technical work has advanced to the point where "our medium-term economic programme has been accepted as the basis for negotiations"; and the "essential outlines of the programme to be concluded with the fund have been settled".
The finance minister insists that a Letter of Intent will be signed in this calendar year between the Government and the staff of the Fund; but he concedes that this may not go before the IMF Board for formal agreement until early next year, possibly January.
As for the quantum, the minister has not given a figure contrary to Mr Shaw’s. Instead, he told the monthly Mayberry Investors Forum Wednesday that the important issue was not the level of resources directly from the IMF; it was the freeing of other funds from multilateral and bilateral agencies tied up since the 2010 agreement was stalled; it was the seal of approval that Jamaica was getting its finances in order; and it was the signal to the financial markets that they could again do business with Jamaica.
PNP takes Holness to task
Meanwhile, the JLP’s criticisms were rejected by PNP Chairman Robert Pickersgill and other senior party officials at a press conference Tuesday where they castigated the former JLP Administration for ignoring agreements in the 2010 deal under which the IMF and the other multilateral financial institutions "extended unprecedented levels of financial support to Jamaica".
Describing the JLP as lacking in credibility and misleading the public, Pickersgill said that the past Administration failed to honour its commitment and the trust between the IMF, other development partners and the Government of Jamaica deteriorated.
Of course, there is some political point-scoring behind the squabbling. Mr Holness, amidst whispers of internal disaffection and challenge to his leadership, appeared tough and combative before JLP delegates. While he has dismissed the whispers, his declaration against detractors indicated that the whispers had got to him.
Referring to some members who believed that the party was designed to serve their narrow self-interest he declared: "I am sick and tired of those people. None of that anymore! I have been patient, but none of that anymore… Now is work time and those who have an issue, leave!"
With four years to go before a general election is constitutionally due, Mr Holness announced that he was embarking on an election campaign now. This seemed to be aimed more at minimising internal rumblings and less at serious electioneering. After all, the party is reportedly short on cash and there are no overt signs that the electorate are ready to contemplate a change in the tenancy at Jamaica House.
Mr Holness knows better than the rest of us that government expenditures will have to be cut in order to meet the key targets that will be part of the pending agreement with the IMF. After all, he campaigned — courageously, I thought — on a promise that he would administer "bitter medicine" if he won the 2011 general election.
A year later, without any improvement in the economic fundamentals, the primeminister- in-waiting is now seeking to reposition himself and the JLP as champions of the poor, a title long held by the actual prime-minister-inresidence.
He issued dire threats if Mrs Simpson Miller and her Administration fiddled with free health care, free tuition, and the social safety net stitched together by PATH and other programmes of social intervention. He’s the new poor people’s champion!
My sense is that the JLP leader was preparing the ground to run away from any hardships that are inevitably part of the fix for a country that is burdened by debt and has difficulty making financial ends meet. These are the same hardships he had promised, but now he wants Mrs Simpson Miller and the PNP to own them. How come?
But the PNP will not let him off the proverbial hook. Mr Pickersgill and his colleagues argue that the roots of the present difficulty lie in the failure of the JLP Administration to honour the commitments made to the IMF in 2010. The result is that Jamaica’s credibility and trustworthiness have been damaged.
Meanwhile, the PNP cannot get away from the reality that the financial and other markets will continue to lose confidence as long as an agreement remains outstanding. And, as I said in a recent column, the Administration has not helped itself by its failure to have a more open and engaging kind of leadership that communicates clearly and honestly with the people so we know where we stand, what hardships we will be asked to endure and how they will be shared.
As we wait, data and projections from the Bank of Jamaica (BOJ) and the Planning Institute of Jamaica are that the economy will close out the year in decline. We are back in recession. The slide in the value of the Jamaican currency continues; and our national reserves fall as the BOJ intervenes to defend the dollar.
In these circumstances we not only need a new agreement to start the confidence programme, but we need broad political consensus so it has a chance of success.
There is no fundamental difference between the PNP and the JLP about how we get out of this difficulty and lay a foundation for the kind of economic growth and human development that have eluded us under the leadership of both parties. Political positioning for advantage is natural, but it cannot obscure the fact that there is little wiggle room.