KINGSTON, Jamaica —The Opposition People’s National Party (PNP) says it is pleased that Jamaica has completed its International Monetary Fund (IMF) Programme after six and a half years, but expressed concern that the programme’s significant fiscal and structural reforms are not delivering the higher levels of economic growth and reduction in poverty that were anticipated from its successful execution.

Opposition spokesman on finance Mark Golding issued a statement a short while ago pointing to recent trends which he said are not encouraging as GDP growth for the second quarter of 2019 was one per cent, falling from 1.7 per cent in the first quarter.

Goding stated that the lay-offs and impending closure of Alpart, the duration of which is uncertain, will have a further dampening effect on economic growth.

“Similarly, this year’s adverse weather conditions may well impact negatively on growth in agriculture, underscoring the need for measures to mitigate the ongoing effects of climate change,” he added.

See Golding’s statement in full:

While the Opposition is pleased that Jamaica has completed its IMF Programme after six and a half years spanning two political administrations, we are concerned that the Programme’s significant fiscal and structural reforms are not delivering the higher levels of economic growth and reduction in poverty that were anticipated from the successful execution of the Programme.

The recent trends are not encouraging. GDP growth for the second quarter of 2019 was 1%, falling from 1.7% in the first quarter.

The lay-offs and impending closure of Alpart, the duration of which is uncertain, will have a further dampening effect on economic growth. Similarly, this year’s adverse weather conditions may well impact negatively on growth in agriculture, underscoring the need for measures to mitigate the ongoing effects of climate change.

Prosperity remains an illusion for all but the privileged few. The latest available data (2017) show that poverty increased by 2.2 percentage points to 19.3%, an unwelcome reversal of the trend in poverty reduction over the preceding three years.

The Bank of Jamaica’s aggressive monetary policy, driving down its policy rate to 0.5% on J$ funds and reducing the cash reserve ratio to release additional liquidity to the banking sector, is not yet showing an impact on economic growth, though we note that inflation jumped in July (1.1%) and August (0.8%).

Meanwhile, the growth in liquidity from this monetary policy is being channeled into foreign exchange purchases to finance greater imports, amounting to US$2.77 billion (up by 15.1%) from January to May 2019 (the latest available data). This has worsened Jamaica’s trade deficit, as the much smaller volume of exports (US$751 million) only grew by 6.3% over the same period. It has also flowed into inflated asset prices in the equities and real estate markets, at a time when Jamaica has not been achieving robust economic growth.

In contrast, the manufacturers and exporters have recently stated publicly that the productive sector is being starved of the resources needed to drive growth. The JMEA has said that some their members are still borrowing at 20% per annum and above, despite the reduction in the BOJ’s policy rate to 0.5% per annum.

In the short term, the circumstances call for proactive and adept fiscal management, within the framework of the approved budget. However, the Opposition notes that for the first four months (April through July 2019) of this Fiscal Year, the Government has run a primary surplus that is exceeding the budget by $5.6 Billion (12.9%), while capital expenditure is below budget by $4.2 Billion (21.4%). Both of these outcomes need to be brought back into line, so that delayed Government spending does not worsen an already bad situation. 

Beyond the short term, Jamaica needs to accelerate the flow of credit to the productive sector, especially MSMEs, strengthen market linkages between local producers and the tourism sector, and channel capital expenditures to build the agricultural sector’s resilience to climate change.

We must also invest more in relevant education and training to increase national productivity, accompanied by transformational social policies to tackle the fundamental causes of crime and violence, which is the major inhibitor to economic growth and sustainable development.

In the post-IMF era, it cannot be business as usual if Jamaica is to get out of the rut of low growth, national despair amidst increasing poverty, and intolerable levels of violent crime.