Last week, the International Monetary Fund (IMF) held its annual conference in Washington, DC. Although it had already downgraded its global growth forecast going into the conference, the sell-off in global markets suggests the agency will need to downgrade it again to reflect the accelerating weakness in Europe and Japan, the slowing of China and emerging markets generally, as well as the myriad geopolitical and other unusual risks.

These risks now include the Ukraine, the Middle East and, particularly noteworthy, Ebola.

Next week in Jamaica, the IMF will stage a high-level conference on the topic ‘Unlocking Growth in the Caribbean’. Its focus on improving the business environment in Jamaica is welcome and has resulted in some important reforms, such as bankruptcy legislation. However, the IMF has unfortunately made a key strategic error in achieving economic growth in Jamaica in the short to medium term.

This error, unless corrected very soon, makes it very unlikely that Jamaica will be able to achieve much faster economic growth in the life of the current IMF programme. The problem has been compounded by the fiasco over energy which, of course, has nothing to do with the IMF.

The background to the error is that decades of a very negative business environment had left the Jamaican productive sector, and particularly exporters, in a very weak state. What originally looked like very conservative growth projections by the IMF for the life of the Jamaican economic programme, now merely seem accurate.

The improvement in the trade deficit has been purely through a reduction in imports, notably oil, as exports have actually fallen at a much faster rate than the reduction in imports.

To achieve meaningful economic growth in the life of the programme, with the timing of the so-called mega projects at best uncertain, the only industry able to respond to the IMF devaluation medicine was tourism.

Indeed, the IMF appeared to recognise this as its growth estimates for the programme up to 2016 appear to specifically exclude the impact of mega projects.

However, for the past three years, the one industry capable of making a real difference to our foreign exchange earnings, with the capacity to absorb sharply increased foreign direct investment, has been subjected to a sharp increase in costs, particularly taxation.

This increase in taxation was combined with severe uncertainty as to the regime that would replace the existing incentives. While a new regime was ultimately negotiated, the requirement that the industry gives up its existing incentives, or face the penalty of paying the standard GCT rate of 16.5 per cent — a punitive 65 per cent increase in the rate of GCT taxation — has been very detrimental for investor confidence.

This is particularly true of overseas investors, who never accepted the imposition of such a penalty as reasonable and regarded it as breaking the spirit, if not the letter, of their investment contracts.

Jamaica does not need to see the same movie twice, having already experienced the impact of the bauxite levy in the 1970s. The correct approach would have been to grandfather the incentives.

The global tourism market is only becoming more competitive, and the Ebola crisis has led to dramatic sell-offs in airline stocks, at sharp multiples of the overall sell-off in the US market. Now would therefore be a good time for the IMF to reconsider the wisdom of this penalty approach in the interest of Jamaica’s future growth, and to focus instead on how to grow tourism faster across the region.