Panic doesn't help, but greater urgency will
Dr Peter Phillips' assertion to the Private Sector Organisation of Jamaica last Thursday that much has been accomplished and there is no need to panic was timely.
Indeed, it was also intended to dispel the tsunami of apprehension flooding local financial circles because of persistent slippage in the exchange rate and the worrying decline in international reserves. What he said was also aimed at calming international financial market interests, rating agencies and multilateral development financing institutions.
The finance minister also reminded his audience and, by extension, the nation that the Administration inherited an economy in dire circumstances. The standby agreement with the International Monetary Fund (IMF) signed in 2010 had collapsed, many of the policy actions were not implemented, the budget deficit was off track, and international financial institutions had stopped lending.
Dr Phillips made bold to claim that the Government has accomplished several important policy actions during its first year in office. He cited a tightened budget which raised the primary surplus from three to six per cent, as well as the Article 4 Review with the IMF and the start of new negotiations with the fund for an Extended Fund Facility.
He would have us believe that there has been progress in tax reform when only the broad principles have been belatedly applied. A debt management bill has been adopted by both Houses of Parliament, albeit much postponed, and he took creative licence when he said that Public Sector Reform is on track.
Despite these "accomplishments", the country is still waiting for pension reform to move from being drafted to being tabled in Parliament.
The negotiations with the IMF, the minister said, "are far advanced" and "the outstanding issues relate to prior actions which we are trying to finalise in order to secure the best deal for the country".
According to Dr Phillips: "I expect that a Letter of Intent will be agreed between the Government of Jamaica and the staff of the fund before the end of the year, for the letter to go to the IMF board for formal approval. Based on the progress made to date, that is still my expectation."
While we believe in maintaining confidence, this type of statement does not achieve that, because as soon as the libations of Christmas wear off, it will be evident that we are looking at the end of January at best.
We have no doubt that the delays in completing the negotiations with the IMF are in part due to the fight to preserve what little sovereignty we have left after a year of negotiations eroded our leverage.
Difficult issues of the rationalisation of waivers and the target and pace of the debt/GDP ratio reduction are still to be resolved.
The minister spoke optimistically of the economic recovery programme, highlighting infrastructure projects and prospective tourism investments. The problem is that these are not going to happen in the immediate future.
Dr Phillips is correct when he said "the world has changed dramatically, and unless we change with the world we are going to be left behind". Jamaica's economic policy, we submit, needs to change dramatically. In this regard, panic does not solve problems, there needs to be greater urgency. The unfinished negotiations with the IMF is symptomatic of the urgency for action.