IMF cannot escape its responsibility

Sunday, August 21, 2011

While Jamaica waits on the current review of our economic performance by the International Monetary Fund (IMF), it is useful to look at certain myths skilfully propagated by the Fund that the targets and quantitative performance criteria are designed by the borrowing government.

This became a necessary propaganda exercise because the IMF had been justifiably and critically evaluated for disregarding the sovereignty of governments by imposing targets and performance criteria on the ones too desperate to resist, in exchange for its vaunted seal of approval.

To fend off its critics, the IMF no longer dictates to governments but simply waits for them to propose what it requires of them. This technique was developed by the Washington-based lending agency so that it can claim that the IMF programme was designed by the borrowing government.

That myth also serves the purpose of putting the blame on the borrowing government if the targets are not accomplished or the performance criteria and conditionalities are not met.

It is possible to meet all the performance criteria but not achieve the targets, for example, passing all the tests but not producing economic growth or reduced inflation or a stable exchange rate. The IMF would simply point out that the performance criteria were poorly designed by the government and claim that it, the Fund, was not to blame.

A more common and more serious scenario is that the borrowing government fails to meet the performance criteria. This could be due to exogenous factors which could not reasonably be foreseen eg oil price increases, natural disasters, civil war and the like. In this case, nobody is to be blamed and the programme is reviewed to include recalibrated targets and performance criteria.

If there were no exogenous factors then the IMF points to the failure of the borrowing government to execute the programme properly, in which case, even more draconian criteria will be required to attain the same targets in the original time period. The IMF's rationale for this attitude is that adjustment must take place in the shortest possible time and that the recalcitrant government must be made to do the right thing.

The IMF feels entitled to adopt this approach because it regards the government that fails tests as not having the political will to stick to the programme which it supposedly designed. The lack of appreciation by the IMF of why the performance criteria were not fulfilled amounts to an irresponsible disregard for what we recently called in this space the social and political limits of economic austerity.

The reality is that the targets and performance criteria are designed by the IMF by its senior officers in Washington DC. It is our view that if these target and performance criteria are not achieved, the Fund cannot escape its responsibility, unless there were exogenous factors. It is absurd for the IMF not to admit its culpability in designing and imposing unrealistic targets and performance criteria and pretend that all problems emanate from the borrowing government's lack of commitment to doing the right thing.

The appropriate action by the IMF is to admit its fallibility in designing the programme and recalibrate the targets, performance criteria and the duration of the programme.

Such recalibration must be guided by the principle that the continuity of stabilisation and adjustment is more important than the speed and severity of adjustment.

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COMMENTS (10)

critical thinker
8/22/2011

Mr. Editor, yuh taking coke or what? What do you mean by the stupid phrase 'the IMF no longer dictates to governments'? Listen up, all EU-run institutions like the UN, NATO, WTO, IMF dictate to foreign nations---- especially those without nuclear weapons. Where have you been living? Don't you read your own newspaper regularly where it's reported that little Jamaica was given a whopping 40 conditions to get the IMF loan----- that will be used to do IMF business, and not ours? Wake up, Mr. Editor!

e h
8/21/2011

BTW there have never been any favourable views of the IMF in Jamaica in any era, so it is a little bit of a stretch to say this Editorial would not have been written in another dispensation.
Check the records.
We like our Governments to borrow without responsibility.

Nejeeper KNG
8/21/2011

If a country borrows without making any change to its fiscal approach; then that country will be a lifetime borrower. That is why an agenda that list our problems without outlining a budgetary approach is unrealistic. The current administration is cutting vital programs because of budgetary reasons. So I am curious to see the agenda for generating new revenues. The money have to come from somewhere; not just a list of problems, we need to know the approach. We need a J’can approach for country.

Nejeeper KNG
8/21/2011

“The IMF no longer dictates to governments but simply waits for them to propose what it requires of them” Requirements is the mild word for dictates. A country should borrow with the intention of being fiscally responsible, controlled spending and enacted policies that caused economic growth. An approach that includes increased investment in education, infrastructure, research/technology development that will stimulate jobs, will provide the foundation for our future economy.

Kevin Donovan
8/21/2011

This campaign to shift the responsibility from the Government to the IMF is becoming boring now Mr Editor. The Government apologist are fighting a loosing battle. Lets make it clear, it was the the Bruce Golden Admin that tabled the initial programme and the unattainable targets. Or not make provisions for salaries, back pensions etc. It was they who set 27 months for political reasons (against the IMF advise). Stop this nonsense. it is the Government's fault, they have NO clue they must Go!

Carlton Gordon
8/21/2011

Your last paragraph is the key. Ironically, that appears to be exactly the premise upon which both the IMF and the Jamaican government are currently working. Hence their evident unanimity and co-operation, in postponing assessments etc, to facilitate medium and long-term stability, following protracted and contentious public sector wage negotiations.We must all now quit the blame game and accept full responsibility for where we are, and for solutions -- IMF or no IMF.

fall mouth
8/21/2011

Mr. Editor are you telling me that if the GOV were the PNP instead of the JLPyou would be writing defending them, the second time in less than 2 weeks? You must remember though Sir, that in your zeal you are making them look very bad, because either they did not know what they were going into or they believed that it was a charitable org. When they were going in, we did hear that the IMF was taking a softer stance to borrowers.
What responsibility has anybody but the terms of a contract?

e h
8/21/2011

Jamaica Observer is clearly on a populist campaign, one it knows it can win, since IMF stirs up such toxic memory in the minds of Jamaicans based on historic politicking by our inept Leaders. Leaders who destroyed the country's economy, yet expect to be granted freedom to borrow without restrictions.
The IMF/World Bank/ IDB does not appear on our Ballots at Election time. You are making a pretty god case for why the next Election should feature the IMF/World Bank/EU/IDB as a Candidate.

wanda woeman
8/21/2011

In your continued effort to press your case for the government you are making your newspaper look very stupid indeed. We cannot get over the over-riding case that the IMF was where they were and it is the govt. which went to them seeking assistance. In seeking to re-engage them the propaganda was that they were new and different (we all know how this can turn out) and that they would take a much softer approach to borrowing countries. So why are we complaining now?. Was it all propaganda and did we go into the agreement with our eyes wide shut?

thor bergers
8/21/2011

this article is a clear example of beating around the bush. it clarifies exactly nothing. It suggests, again, that poor old Jamaica is the victim, of what exactly ? itself ? the west ? the IMF ? its leaders ? fate ?

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IMF cannot escape its responsibility