JAMAICA is entering another relationship with the IMF. It could be a third IMF suffocation (standby agreement) for Jamaica if it follows the 1976 -1977 or 1985-1999 prescriptions, or it could be centred on lines of real mutual respect and understanding in formulating and designing a sustainable capital action plan geared to create employment, alleviate poverty and degrading human conditions by providing surplus wealth for the nation.

Our current problems are a result of the global financial debacle – downward trend in economic terms – caused by the global meltdown in the large, powerful industrial countries, USA, EU, Russia, and Japan, and soon-come China and Brazil.

The previous minister of finance, Dr Omar Davies, was in office for 13 years and it was he who in good faith, in order to grow Jamaica’s economy and based on the then global economic growth trends, terminated our standby agreement with the IMF and resumed borrowing funds in the private-sector banking system. This was not too expensive then as the Euro currency was below par to the US dollar.

It was not too long after the PNP’s loss in the general election of 2007 that the global financial meltdown took place and the global financial institutions started to collapse, because of financial manipulation and political greed.

Our earnings as a nation are down due to global recession. Here comes the IMF, due to our inability to service our debts. Is it a saviour or sinner?

The JLP government is currently saddled with paying yesterday’s loans, and is taxing the nation as our economy slows down with less bauxite being exported, fewer tourists and fewer overseas remittances.

I vividly remember the IMF prescriptions for Jamaica in 1979 with the resulting gas-price demonstration by the JLP, and the 1985 roadblocks against tax increases and vigils against devaluation of the dollar, organised by the PNP. These actions by our political parties were highly disruptive to our lives and economy. Yet are we again at the same spot?

I would like to quote from one of our foremost journalists at the time, Hector Bernard, who wrote in his newsletter, INSIGHT, in October 1998:

“The local media have been reporting snippets of the recent IMF Article of Consultation and Discussion on the Jamaican economy. And it would appear from some reports that certain sections of the press are anxious to reveal evidence of disagreement between the IMF and the Government of Jamaica.”

I hope to God that the IMF is not the same institution of yesterday. It was supposed to be reformed by the 22 members of the OECD some 10 years ago. If it did not change, then “dog nyam wi suppa”.

When the IMF was created in 1945 at Bretton Woods, its mission was to stabilise currency exchange rates among nations. It was expected to do so by buying the currency of distressed nations to maintain the value of their money.

However, over the years, the Fund has assumed an expanded role. It has become the lender of first and last resort for financially strapped countries. If governments or their banks could not service debts they incurred, the IMF rushed to the rescue with billions of dollars in aid made available by the contributions of its affiliates (public and private banks).

But in doing so, the Fund has been imposing “conditions” on the recipients of its largesse, almost all of whom are the poorer nations of planet Earth. The idea was to make us self-sufficient by developing our export capacities.

Is it something we have been doing for the last 355 years, 1655-2010? Producing sugar, bananas, pimento, logwood, cocoa and people, etc?

The IMF policy programme has been to stimulate our exports further by devaluing our currency that supposedly will make our exports more attractive, earn us foreign exchange to handle our back-breaking debts.To achieve this end, the Fund insisted that its clients (meaning Jamaica) do the following:

* Keep wages low to keep prices low on our exports.

* Cut back on all social welfare programmes because they are a cost that adds to the price of exported products.

* Let the Jamaican currency fall in value to make exports cheaper and to make imports more expensive.

The result of such policies is that the living conditions of working people move from bad to worse. What little there is of domestic market could crumble and we could end up in a wringer with political unrest and economic stagnation. Bernard’s INSIGHT also said in October 1998:

“For too long, the IMF has operated on the theoretical basis that balance of payments deficits are always the result of overvalued currency and fiscal deficits. Consequently it was caught off guard by the financial crises in Asia (1997).”

So long, however, as the world economies were moving along tolerably well, there were few critics of the IMF and its “conditionality”. But now, thanks to a growing uncertainty about the economic future, the once sacrosanct IMF has been under fire. In an address to the New York Stock Exchange, former British Prime Minister Tony Blair said, “The current crisis illustrates the weakness of the existing international financial system. It needs to be modernised.” He then added pointedly, “The IMF does not and cannot play this role – the finance it provides is strictly limited and is usually provided in return for specific demands,” Then, even more pointedly, he said, “It is important, too, that programmes should take full account of their impact on the poorest sections of society.”

The USA is not opposed to this line of reasoning. Treasury Secretary Paul H O’Neal is paraphrased by The Wall Street Journal as saying that “it is quite possible that substantial changes need to be made to the IMF”. He referred to a group of 22 developed industrial nations that were preparing reports on several areas of global financial reform, including how to ensure that international bailouts don’t simply rescue Western lenders while imposing severe punitive economic hardship on the population of emerging developing countries.

I only hope that out of these reforms will emerge an IMF effort of how to cope with the current global crisis in ways that are quite different from the counter-productive policies of past IMF policies. After all, when we devalue our currency, we will buy less goods and services from developed countries, thus retarding their economies. Duh…

Eran Spiro is a human settlements development adviser.

eranspiro@yahoo.com