ON Monday, the UK’s leading Financial newspaper, the Financial Times (FT), had an article headlined “IMF bailout looks like last chance for Jamaica”. The newspaper quoted what it described as a senior official involved in the talks as saying: “It’s a high-risk programme, a last-ditch effort to avoid a massive adjustment, even a collapse.” The article concludes by noting that “there is widespread pessimism over Jamaica’s ability to enact fiscal cuts and economic reforms of the dimensions required”.

The first issue that needs to be faced squarely is that the article accurately reflects the view of the international financial community, including many informed Jamaicans based overseas working in the international financial sector. The questions being asked is quite simply “why will this time be different”.

At Tuesday’s joint press conference with the IMF, Minister of Finance Peter Phillips, responding to a question about the FT’s apparent scepticism, noted that it was not a surprise to anyone that the programme is difficult, and that the markets are going to take a wait-and-see position, as they want to see evidence of seriousness of purpose. He added that the apprehension in various sectors of the international financial community included the development banks, who had nevertheless committed “substantial resources”.

In their press release, the IMF emphasised “implementation to put the public debt on a firm downward trajectory, bolster investor confidence, facilitate the timely provision of budget support by foreign partners, and provide a foundation for sustained growth. We reiterated that the authorities’ multi-layered reform agenda — comprising ambitious fiscal consolidation, improvement in competitiveness, debt reduction, and improved social protection — would require strong resolve, and was necessary to decisively tackle Jamaica’s long-standing challenges and restore growth.”

The first thing to note is that, from a mathematical perspective, the Government’s programme adds up. The dramatic up front fiscal adjustment, if achieved, would mean that for the first time in decades, Jamaica’s budget would be near balanced this year (a central government deficit of half a per cent of GDP), the difference between interest costs of about eight per cent of GDP and the key primary surplus target of 7.5 per cent of GDP. Almost as important, the elimination of the deficits of the public bodies, which in some years have almost equalled the central government deficit, means that the overall debt stock won’t grow significantly. The recent debt restructuring both reduced interest costs — at eight per cent of GDP its the lowest in a long time —and sharply reduced the amount of principal that Jamaica has to repay (amortisation) over the next three years.

As the IMF argues, there is now a clear path to debt sustainability, even at the relatively low rate of growth projected in the programme, which is projected to climb gradually from 0.8 per cent in the current fiscal year to 2.2 per cent in 2016/2017, or roughly in line with our historical average. The projected growth in nominal GDP, because it includes inflation, would allow Jamaica to reach its key overriding target, meaning the reduction of Jamaica’s debt to 96 per cent of GDP by 2020, assuming interest costs stay low.

The main risk would be the underperformance of tax revenues, or growth being significantly below target, or both. Nevertheless, the 2020 target is well beyond the current four-year life of the programme, and is a much more realistic time frame to achieve debt reduction to under 100 per cent of GDP that our previous IMF programme of 27 months.

What will determine success or failure of the programme is whether we can achieve Jamaica’s ambitious structural reform agenda. The first thing to note is that it is only ambitious because it includes things that we have promised to do, or should already have been done, from three, five or even ten years ago, and have still not been achieved.

One of the most important reform initiatives is to establish a Secured Transactions Reform (STR) Framework with specific timelines for the legislation and central collateral registry, with the latter being a structural benchmark for December 2013. This is particularly important as, despite its very high overall debt, Jamaica has one of the lowest ratios of private sector credit as a percentage of GDP in the world (above only Haiti in this hemisphere), suggesting that there is enormous potential for the profitable expansion of private sector credit, the very fuel of economic growth. Countries typically get into serious trouble from excess private sector credit creation when it reaches between 200 and 300 per cent of GDP, or roughly ten times where Jamaica is today. Even a small increase in Jamaica’s ratio of private sector credit ot GDP would mean much faster growth over the period.

Other critical long-standing reforms the Government has committed to include tabling an Insolvency Act, streamlining business registration, implementing a mobile money initiative, encouraging Public Private Partnerships (an updated policy has been in place since November last year), and further reform of the public bodies.

The other reform with a potential impact as great, or even greater short-term impact than the issue of access to credit is tax reform. For a long time, according to a former multilateral official “policymakers in Jamaica have had an extremely short-term focus on macro problems and effectively ignored underlying structural reform, an approach that ends up with one lurching from crisis to crisis, with no apparent plan other than to make it through the next two weeks to six months by putting band-aids on whatever the current fiscal crisis is.”

The lack of resources provided to address critical reforms, coupled with an apparent lack of urgency, for obvious problems too numerous to mention, make his observation no more than the truth. This time has to be different. The FT article will only turn out to be too pessimistic if we get serious about addressing critical reform bottlenecks, using the type of critical path analysis used in the private sector. A good starting point would be to double the budget of the Office of the Parliamentary Counsel, the entity responsible for drafting legislation, to ensure that the heavy legislative reform agenda does not become the road block that derails Jamaica’s IMF programme.