MINISTER of Finance and Planning Dr Peter Phillips moved yesterday to assure nervous Jamaicans and jittery international markets that a new International Monetary Fund (IMF) pact was on track for December.
“There is no delay in an agreement with the Fund. There is no delay in the timetable of negotiations,” Phillips told the House of Representatives. “There is no sticking point on which ourselves and them (IMF) have a divergence of any fundamental views.”
The finance minister was responding to questions raised by Opposition Leader Andrew Holness following his statement on the economy on the resumption of Parliament following the summer break.
Phillips denied that the issue of greater exchange rate flexibility, which would see the Bank of Jamaica reducing its role in propping up the local dollar, was a point of contention with the IMF. He also denied that he had ever suggested that “the days of low interest rates are over”.
“Let me say definitively that no such statement has been made by me,” he said in response to Holness, who claimed that it had been rumoured that the statement was made by the minister.
Holness said that he was “grateful” for the clarification and went on to identify the reduction in the resources of the Net International Reserves (NIR) to 14 weeks which, he said, were two weeks shy of the balance of payments limit, as another source of concern for the business sector.
Dr Phillips explained that current pressures on the Jamaican dollar were created by the derailment of the previous Stand-By Agreement with the IMF which, he said, had blocked access to other critical international lending agencies, including the Inter-American Development Bank, European Union and World Bank.
“The reduction in the reserves is a direct consequence of the inability to access those resources... and that applies also to the private capital market internationally (unless we are prepared to accept significantly higher interest rates),” the minister said.
“That is the source of the deterioration in confidence, or the spread of uncertainty,” he explained.
Phillips blamed some commentators for continuing to spread false claims which, he said, had reinforced uncertainty, and urged them to be more “circumspect” in their commentaries.
Phillips also stuck to his assurance that during the visit of an IMF team to Jamaica, September 25 to October 5, all the issues that had arisen and the necessary testing of the Government’s programmes would be done.
He recalled that the critical objectives he had set out for an IMF agreement are: elimination of the fiscal deficit; reduction of the debt to 100 per cent of the Gross Domestic Product (GDP) by 2015/16; and reduction of wage-related costs to nine per cent of the GDP by 2015/16.
Reduction in reserves a direct consequence of inability to access funds, says Phillips