Life after the IMF agreement...

Sunday, February 10, 2013

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TOMORROW evening the prime minister and the minister of finance will address the nation on the status of the negotiations with the International Monetary Fund (IMF), a long overdue briefing which is anxiously awaited by all sectors of Jamaica.

The protracted negotiation has caused a build-up of uncertainty that has paralysed some economic activities, among them certain large investments, and prompted some undesirable activities, such as speculation against the Jamaican dollar.

Tomorrow's announcement will have to be followed by a more detailed exposition in the House of Representatives to provide an update on negotiations with the IMF and hopefully inform the country that there is an agreement on a Letter of Intent. If so, Dr Phillips would be entitled to say: "O ye of little faith".

More importantly, Minister Phillips will need to outline the prior actions necessary to ensure passage of the agreement by the Board of the IMF. These measures will relate to debt management and measures to improve fiscal management. No surprises here as both are in urgent need of attention to ensure that an IMF programme can be sustained.

Ironically, the negotiation of an agreement with the IMF and the prior actions, as difficult as they have proven, is the easier task compared with successfully implementing an IMF agreement in its entirety and for the full duration. Since the 1970s, no Jamaican Government has completed the implementation of any IMF agreement.

This time, Jamaica must stick to the programme because we have run out of time and options and exhausted the patience of financial markets and the almost bottomless well of goodwill of our friends, the US, UK, and Canada.

When the full content of the IMF programme is revealed, whether tomorrow or soon thereafter, it will clearly centre around a sharp and quick reduction in the budget deficit, and that must involve expenditure cuts and increased revenue, including tax reform and, hopefully, no increased taxes.

Implementation of the IMF agreement will require pragmatism, patriotism, and performance. Pragmatism will have to guide the actions of the Government in the management of the IMF programme and, in a wider sense, simultaneously pursue a blend of fiscal consolidation, restraint on more borrowing and stimulating economic recovery.

Economic growth cannot depend on Government spending. It will have to be private sector-led. This will call for the patriotism of the private sector, especially our exporters, and we salute the business sector for its support for Jamaica in difficult times.

Patriotism of an extraordinary type will be required from Jamaicans, notably the hard-pressed middle class and ever resilient working class people. The trade unions will have to opt to save jobs in the public sector rather than press for the well-deserved salary increases owed to civil servants.

If the Government expects this type of patriotic sacrifice, then it must set the example -- no more unnecessary expenditure -- and it must lead by performance by meeting the IMF targets and performance criteria.

Government, business and the people of Jamaica will all have to be at their maximum performance, most patriotic and most pragmatic.

It is almost needless to say, yet we'll do it for emphasis: The IMF pact is only a first step as our national duty is to galvanise our society to earn our way to prosperity.




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