The alternative to IMF pain is even more pain
Without an IMF deal...pure grief!
TODAY I wish to share with you the views of the private sector on what I believe in the short run is the most pressing economic issue facing our country, the pending International Monetary Fund (IMF) agreement.
Since Independence, World Bank figures suggest that Jamaica’s per capita GDP has grown at an annual average of 0.6 per cent. This is one third the average global growth rate per capita of 1.8 per cent since 1962. Put simply: if Jamaica had grown at the average rate of the world over the last 50 years, we all would have been three times better off today. Or we could say that what the rest of the world has achieved in income growth per person in the last 50 years will take us another 100 years to get to, unless we start to grow much faster.
A recent PIOJ document underscores my point in stating: “...In a historical sense therefore, the Jamaican economy has exhibited a pattern of underperformance in terms of overall growth. This chronic pattern of underperformance has left in its wake a high level of public debt, unemployment, deterioration in physical infrastructure and in the delivery of social services (such as health, education and the justice system). These inherited conditions underpin significant and persistent levels of poverty as well as the continued existence of marginalised, vulnerable, and volatile communities throughout the country.”
I believe that a failure to grow our economy is the single greatest reason for most if not all the ills we suffer from as a nation, such as crime, poor education quality, a deterioration of institutional capacity etc.
However, we are now at the place where to set the stage for growth we have to deal with this tremendous debt overhang and create the foundation for future economic growth. By itself this cannot create growth but it is a necessary precondition to growth. The first step is to secure the IMF “stamp of approval” for our fiscal medium-term programme.
An agreement with the IMF has become the anchor of economic decision-making with regards to Jamaica. The local and international capital markets, investors, rating agencies, multilateral and bilateral institutions are currently predicating their decision-making on the settlement of an agreement with the IMF.
The lack of an IMF deal has resulted in decline in business and consumer confidence and a general ‘wait-and-see’ attitude among business. This has severe implications for an already fragile domestic economy. The lack of a deal has also resulted in reduction in foreign exchange flows from other International Development Partners (IDB, World Bank) who are basically awaiting the finalisation of an IMF deal for further disbursement.