The raging debate over Jamaica's negotiations with the International Monetary Fund (IMF) for a Stand-by Agreement has revived memories of the island's stormy relationship with the multilateral agency in previous years.
The Sunday Observer spoke to economist Errol Gregory and lecturer and social commentator Martin Henry, who recall the social and political effects of the IMF's policies on Jamaica from the 1970s — when critics of the then Michael Manley-led Government, satirically changed the meaning of the abbreviation IMF to 'Is Manley Fault' — through to the 1990s when then Prime Minister PJ Patterson famously declared at a public meeting that his Government had told the IMF "goodbye, ta ta".
Errol Gregory recalls
Regarding the mid-70s to 1980 period, Jamaica's relationship with the IMF was occasioned by a chronic shortage of foreign exchange as progress made in advancing the social agenda was achieved at the price of significant declines in the gross domestic product. Not surprising, this was the period of classic social change and nationalism consistent with the [Michael] Manley regime.
As such, the IMF's dictates were definitely viewed as anathema to growth and development. At that time I had just joined the working world, and my first recollection of the period was that of rising food prices linked to the prescription of devaluation [of the Jamaican dollar] by the IMF. This increase in domestic food prices occurred at a time when oil and commodity prices were rising. That represented more than a double whammy for consumers.
For the average consumer, this was a difficult period, as the rising prices ultimately led to shortages and 'marrying' of goods. There were attempts by the Government to push aggressive import substitution, but these programmes did not achieve sufficient success to counter the difficulties being experienced by the poor.
* Concerning the political temperature of the time, there was noticeable class antagonism with the perception being that the "well to do" could survive the difficult economic realities that were oppressing the poor. There soon developed a wider political divide, with the ruling PNP that allied itself to a socialist agenda said to better represent the interest of the poor than the 'capitalist' JLP that was supposedly associated with business interests. In a nutshell, this was the background to the issues that dominated the 1980 election.
Period of the 1980s
Jamaica's relationship with the IMF continued in the 1980s occasioned largely by external shocks that impacted the local economy (fallout in the bauxite industry). My main recollection of the period was the heightened national debate concerning the IMF's intransigence in enforcing structural adjustment programmes as a condition for any disbursement of funds. Structural adjustment reinforced the dogma of devaluation, liberalisation of financial and product markets and reduced spending on the social sector.
In the case of the average consumer, a plank of the structural adjustment programme was a sharp reduction in the public sector of 30,000 workers. The decision by the Government of the day to pursue this strategy further cemented the social antagonism of the previous period and led to a national strike spearheaded by the unions. Additionally, the liberalisation of the product markets was seen as the death knell of the small farmer, especially in sugar and bananas.
The irony of this period is that, in conjunction with preferential duties by the American Government (the Caribbean Basin Initiative), progress was made in generating new jobs, mainly for young unemployed women. There was also improvement in the growth figures, but this was accompanied by an increase in the proportion of debt to GDP ratio.
* On the political front, the stridency of the [Edward] Seaga Administration in implementing the structural adjustment programme — even despite his reluctance to devalue the currency on one occasion — made the Administration appear unsympathetic to the concerns of the poor. It is in this context that the change in Administration in 1989 is sometimes interpreted.
The Administration of the '90s eventually said goodbye to an IMF borrowing relationship, but had its cake and ate it as the Government chose to be part of a staff-monitored IMF programme. This move allowed the Government to take advantage of a flush international financial system where, given the IMF imprimatur, it could borrow in the overseas financial market. This, of course, without IMF conditionalities. It is interesting to note that one perspective on this period is that since there were no conditionalities guiding the Government's macro-economic policies, its expenditure programmes went out of whack and paved the way for the current debt crisis.
The main difference between the initial IMF programme and the current IMF debate is that in the early IMF regime the IMF defined and designed the economic programme. In the current dispensation, the IMF sets the targets and the Government designs the programme to attain the targets.
For example, the IMF has set the target of a balanced budget by 2015 and the Government has to design the programme to achieve this. The Government therefore enjoys a greater level of flexibility than before, as IMF officials have conceded that they have made errors — an admittance that was unheard of in the halcyon days of the IMF.