Shaping a new IMF package

Tuesday, July 19, 2016

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Jamaica is coming to the end of its current four-year Extended Fund Facility (EFF) arrangement with the International Monetary Fund (IMF) and already the country is in talks to continue a fruitful relationship with the Fund.

We note, however, that the inevitable debate has begun over what shape any new IMF package should take, to ensure the most effective agreement going forward. Some people clearly want one that closely resembles the current pact, as opposed to a milder version preferred by Finance Minister Mr Audley Shaw.

For those who missed Mr Shaw’s address to last week’s economic forum staged annually by the Private Sector Organisation of Jamaica and the Jamaica Money Market Brokers, the finance minister said: "This successor programme will be instrumental in building on the achievements already made and tackling the challenge of achieving sustainable economic growth with fiscal consolidation and debt reduction."

Mr Shaw’s position has drawn disagreement from several quarters, including co-chair of the Economic Programme Oversight Committee, Mr Richard Byles, who wants to see the retention of the sanctions and safeguards which are key features of the current EFF.

He argues that any programme without an administrator such as the IMF would require full participation from all sectors of the society and transparent actions from government, if it is to be effective. Historically, when Jamaica has been in charge of its economic programme, there has not been much success, he said.

"We have learned that with an IMF programme that has sanctions, we perform; with an IMF programme that has specific targets with timelines, we perform. When we don’t have those things, experience has been, we don’t perform," he asserted.

Both Minister Shaw and Mr Byles have a point.

Mr Shaw and the Government have consistently insisted that economic growth is critical to achieving a better standard of living for Jamaicans. There is general agreement that the IMF programme is mainly aimed at getting the fundamentals of the macroeconomy on track. While this could establish the foundation for economic growth, growth is not the central focus.

That is one of the planks on which the governing Jamaica Labour Party (JLP) campaigned and the reason the Government has since introduced a Ministry of Growth. In that context, we understand Mr Shaw’s logic in seeking a more flexible, growth-focused IMF package.

While Mr Byles may be too stuck in the mould of the old agreement, we also understand the need to avoid squandering the gains of the outgoing EFF. We must continue to reduce the debt and creatively hold government spending in check, without which growth would be pyrrhic.

In the meantime, we are quite pleased that the Government is showing commitment to the successful completion of the EFF which ends in December 2016. This will ensure that the Fund remains happy with Jamaica and that we can continue to receive its vaunted seal of approval.

It also sends the right signal to the international investment community that Jamaica means business and is a safe bet.

As we took to the country’s 54th birthday, let us remember that Jamaica’s prosperity is our business. Let us also pledge, in the name of future generations, that we will redouble our efforts to remove the circumstances that gave rise to our dependence on the IMF.




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