The day of reckoning is upon us

Thursday, February 14, 2013

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NO Jamaican government has successfully implemented an International Monetary Fund (IMF) agreement since the mid-1970s when we first signed a pact with the Washington-based institution.

Successful implementation would mean doing all the policy measures and meeting all the quantitative performance criteria for the complete duration of the agreed economic programme.

The administration led by Mr P J Patterson avoided the ignominy of failure by ending a borrowing agreement with the Fund in the mid- 1990s.

The consequences of a record of comprehensive failure are many. First, Jamaica has little or no credibility with the Fund, but fortunately still benefits from the goodwill of the United States, Canada, the United Kingdom and the European Union. The goodwill, however, has been exhausted and therefore this is the last time that friends suffering from donor fatigue will give Jamaica a chance.

Second, the IMF is demanding that the most difficult actions be taken by the country prior to passage of the agreement through its increasingly sceptical board.

Third, the World Bank and the usually very supportive Inter-American Development Bank will await the IMF's vaunted seal of approval to resume lending to Jamaica.

This time, Jamaica has to stay the course of the IMF agreement to regain credibility and maintain goodwill. More importantly, we must begin to decisively change economic policy and the entrenched culture of mismanagement.

Our well known mindset of complacency and outright denial has got to change. Old habits such as the addiction to borrowing must be terminated and efficient systems implemented, otherwise the Government is destined to repeat the failures of the past. This time the breathing space provided by the second round of debt exchange must be used productively and not simply to postpone the day of reckoning.

All sectors of the nation are going to have to change. The political directorate will have to be transformed into real leadership and put the long-term welfare of the country ahead of electoral victory. The tendency to hoodwink the nation has to end.

The task at the centre of economic policy is reform of fiscal management to create a viable budget which allows the debt servicing to be reduced to levels which allow government expenditure to do what it is supposed to do - stimulate economic growth and alleviate poverty.

This involves measures on both sides of the ledger. Expenditure has to be curtailed by trimming the public sector in size and overall wage bill and collecting the revenue from the $16.4 billion in taxes which have just been inflicted on an already emaciated economy. The public sector needs to be rationalised, starting from what can be afforded and not what we would like, and this can be done without sacrificing public sector jobs. The long overdue tax reform would allow the tax burden to be reduced rather than increased, especially if collection is made more efficient.

It is very important that the brunt of the sacrifices required by all sectors be borne by those who are better able to afford it. It must also be made clear that we have to stay the course, and that course is not one year but 3-5 years.

Both Government and Opposition must eschew playing politics and ensure that Jamaica succeeds with the stabilisation, consolidation and adjustment on which it has embarked once again.

The pain and sacrifice demand no less.




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