Dear Sir,

It is close approaching 12 months since the managing director of the IMF, M Dominique Strauss-Khan, discussed Jamaica’s financial situation with Prime Minister Golding and his senior financial and monetary officials.

There seemed to have been a meeting of minds then as there is uncertainty now.

The terms and conditions of the much-talked-about but elusive Stand-By Arrangement are in limbo.

In the interim, a minister, a financial secretary and a Governor have departed. This is a rather poor demonstration of sound governance on either side. What is the IMF’s excuse?

What is the Golding government’s predicament?

In large part it has inherited a depleted and demoralised public service. This has been in the making over the past 40 years. ‘Politics’ has intruded and eroded the professionalism and independence of a once highly valued institution of governance.

The Public Service Commission should be recalled from ‘long leave’. Instead a Unit has been set up. Without technocratic abilities at the heart of the government, there is no chance that economic policy formulation and implementation will meet the grave challenge. The ad hoc expedients give only the appearance of ‘value for money’. In fact, it piles inexperience on incompetence.

Priority number 1A is to begin a serious process of civil service repair, pronto. Not the mishmash of misnamed ‘public sector modernisation’ that consumed so many resources with too little results.

Priority number 1B is to let some light in on the policy choices. Political credibility demands more than the ad hoc responses, especially of bureaucratic musical chairs, and Delphic pronunciata.

There is some murmurings of the Constitution guaranteeing Debt service as the first charge on government revenue. Section 116 (4) is referenced. The layman also notes that so are all charges for ‘services’ incurred by government, entered in the annual appropriations and finding their way onto the Consolidated Fund. Which comes first? ‘Life, Liberty or Property (the so-called ‘pursuit of happiness’)’?

The legal experts point to Imperial legislation, namely the Colonial Loans Act (1899) and the Colonial Stocks Act (1900) to buttress their reading of the Jamaican Constitution. Let the jurists and experts contend on both law and economics. And let them note that in Independence, governments have consented to the primacy of foreign jurisdictions in settling disputes that may arise with foreign debt holders, among other caveats.

Into the mix is the fact that government, in taking on the liabilities of the failed financial institutions in the 1990s, some J$80 billion and still counting, ballooned the public debt and piled it on to the backs of innocent bystanders.

Even as the government turned away from the IMF, it sought funds linked to ‘policy advice’, borrowing to service debt from other multilaterals. This policy increased net outflows to these multilaterals, leading to the conclusion that government and multilateral policy left much to be desired.

The bubbling private international credit markets were ready to lend at the right premiums over LIBOR, at rates reflecting risk of Jamaican default. The price was steep. A high premium is the price paid in the eventuality of ‘restructuring’. Standard practice. Given the cheap credit flooding markets, the investor/speculator was happy for the top-up that Jamaican instruments offered, girded with ironclad Constitutional guarantees.

It is said that the IMF was vexed by government’s action to turn away. Does this explain partly the IMF’s posture as to the debt strategy it expects the government to pursue this time around?

The change in administrations notwithstanding, government has indicated that it intends to continue the reading of the inviolable ‘constitutional’ guarantee.

However, how is one to understand this when one of the rating agencies, Standard and Poors’, as far back as the 1990s published in one of its reports Jamaica’s ‘default’ when it ‘restructured commercial bank debt within the period 1978 to 1993’. Is there a narrow definition of ‘default’ used by S&P? Do the finance ministers in that period have anything to say?

Given Government’s reaffirmation of fully servicing the debt, why has S&P in 2009 issued successive downgrades to Jamaica’s rating? Is it because private domestic debt holders are open to refinancing and/or restructuring? Is S&P firing a warning shot across the government’s wavering bow?

Sovereign nation-states have in the recent past been able to default on domestic debt without legal recourse, while at the same time honouring external debt. A recent study has come up with the counter-intuitive finding that governments with authoritarian tendencies are more likely to be more accommodating negotiators with its external creditors than those confident of their democratic credentials and public support.

The 2008 Carey Commission, slow off the blocks, is now in play. If properly managed it could influence the present discussions with the IMF, by throwing light into the dark shadows of international high finance and its regulation at the periphery. It could, for instance, indicate how the real economy of was made to pay a very high price to maintain what is euphemistically called ‘stability’.

A recession that may double dip threatens even more suffering among the poor and middle-income groups. With no fiscal room for stimulating recovery in jobs, and with a deteriorating natural physical environment looming on the near horizon, government and its private sector boosters should be goaded to deliberate action, carrying its citizens along.

Jamaica’s net international investment position continues to deteriorate. The room for recovery narrows as the right to choose is taken from the elected representatives of the citizenry.

Is Santa Claus coming to town?

Yours truly

Anthony Hill

8 Carmel Terrace