Dear Editor,

There has been a lot of talk about the Jamaican economy and International Monetary Fund (IMF) since the announcement of Minister of Finance Dr Nigel Clarke’s appointment to the role of deputy managing director at the IMF.

I wish him the best, although I have my own thoughts on the state of the economy.

Let’s begin with debt, an important factor in finance. Every country, every company, everyone has debt, the key is how we manage it to improve financial health and use it to sustain our ability to earn and spend. Many times it is more beneficial to borrow than to use own capital to fund ventures or even repay existing debt. Jamaica has a long history with the IMF, a powerful lender of last resort. We also borrow from the World Bank, Inter-American Development Bank, and Caribbean Development Bank.

When we think IMF, we immediately think of austerity measures with rigid terms — such as public wage freeze and increase in taxes — that are dictated without room for flexibility or negotiation. These IMF measures strangle countries like Jamaica, mostly developing countries and former colonies, impeding growth and productivity and insult our sovereignty.

Politicians like to use acronyms and statistics that most people don’t understand to push an agenda. While it is positive news that the debt-to-gross domestic product (GDP) ratio has reduced significantly under the IMF programme which Minister Clarke managed, many believe our debt is declining, which is not true. Statistics can be angled to confuse.

Total debt has been stable at approximately US$17 billion, which is high for a country our size. GDP, the other factor in the ratio, is an accounting measure of productivity and output, and debt ratio ideally should be less than 100 per cent, suggesting that our capacity to produce and earn exceeds debt. GDP, however, is a poor measure of well-being and growth, as many economists now agree. It does not measure quality of life or explain the distribution of income and wealth in a country. And it ignores social factors, such as health care and housing. GDP does not measure corruption and environmental costs, climate change and sustainability. GDP is useful to rank countries economically based on output and assess risks for loans, but it is a flawed measure of success and progress.

If GDP is increasing, which reduces the debt ratio, this suggests an increase in productivity and income and, naturally, debt should also be declining, but it is not. Economic growth of 2-3 per cent annually is hardly enough to have a significant impact on the economy, although positive is better than negative. Inflation for the past 10 years is stable, averaging 5-7 per cent. Unemployment at 4 per cent is very low, even by global standards. This measure is questionable if it counts people working casually a few hours per week as employed. The labour force (the denominator) may include people who should be excluded, like seniors and homemakers.

How can Jamaica’s unemployment rate be lower than advanced countries like Finland, Norway, and Canada, which averages 6-8 per cent? Why are university graduates finding it difficult to land jobs with this low unemployment rate? None of these statistics tell the full story. Jamaica’s GDP is only 2 per cent of the GDP of the region, although it is among the larger countries. While debt is essential, we need to reduce debt and the amount spent from the budget to service debt, currently 37 per cent. We must focus on attracting investment capital.

Although debt-to-GDP ratio has been reduced, total debt remains the same. It is also misleading, in my opinion, to tell Jamaicans that new buses purchased recently were bought “in cash” using our money and not loans, when it was due to loans that we were able to access more of our own money.

While the economy might be stabilised, we cannot distort reality with the illusion that cash is suddenly flowing due to prosperity. When the Jamaican currency appreciates in value, this is a sign that the economy is improving. When we close gaps in imports v exports; when we earn more from exports and spend less on imports; when we consume more of what we produce — these are all signs of economic growth. When we start reducing debt, this is surely a good sign of economic progress. When there is less poverty and more in the budget to spend on the things that matter — health, education, social services, we know the economy is doing well. Jamaicans have an insatiable appetite for luxury and foreign items without realising how this impacts the local economy.

As Minister Clarke makes his exit, we are reminded that we are still trapped in a vicious cycle of heavy public debt. Let us explain with transparency so that people understand and can appreciate gains made. If we tell the truth, we don’t have to distort the facts to push an agenda.

P Chin

chin_p@yahoo.com