Ja­maica and the IMF beyond 2017

Jamaica Gleaner - - SPORTS - Dr An­dre Haughton is a lec­turer in the De­part­ment of Eco­nom­ics on the Mona cam­pus of the Univer­sity of the West Indies. Fol­low him on Twit­ter @DrAn­dreHaughton, or email edi­to­rial@glean­erjm.com.

THE DE­PART­MENT of Eco­nom­ics at the Univer­sity of the West Indies, Mona, will be host­ing a Fo­rum ti­tled: The IMF and Beyond 2017 at the Med­i­cal Sci­ences Lec­ture Theatre to­mor­row at 5:30 p.m. to 7:30 p.m..

The Fo­rum will fea­ture pre­sen­ta­tion from Colin Bul­lock, for­mer ex­ec­u­tive di­rec­tor of the Plan­ning In­sti­tute of Ja­maica, who will give his perspective to Chart the Way For­ward: Crit­i­cal Re­flec­tions on Ja­maica’s Re­cent Re­la­tion­ship with the IMF.

Dr Con­stant Lonkeng Ngouana, res­i­dent rep­re­sen­ta­tive of the IMF in Ja­maica, will dis­cuss; ‘Ja­maica and the IMF Beyond 2017: Prospects, Prob­lems, Pri­or­i­ties.

Richard Byles, pres­i­dent and CEO Sagi­cor Group Ja­maica and co-chair­man, of the Eco­nomic Pro­gramme Over­sight Com­mit­tee will dis­cuss: Will Ja­maica Still Need the IMF after 2017? A Pri­vate Sec­tor Perspective.

Dr An­dre Haughton, lec­turer in the De­part­ment of Eco­nom­ics, UWI, Mona will dis­cuss, Beyond 2017: The IMF, the Growth Agenda and Good Eco­nom­ics.

What is the rel­e­vance of the fo­rum?


Over the last 40 years, Ja­maica has en­tered 13 suc­ces­sive ar­range­ments with the IMF, which has pro­vided not just for­eign-cur­rency sup­port through spe­cial draw­ing rights and draw­downs, but has also pro­vided guide­lines along the way to help in­crease the in­debted na­tion’s macroe­co­nomic sta­bil­ity which is nec­es­sary to en­hance its eco­nomic growth po­ten­tial.

How has Ja­maica per­formed his­tor­i­cally?

The suc­cess Ja­maica wit­nessed in the 1960s when GDP av­er­aged more than five per cent per an­num was ex­tin­guished by high pub­lic bor­row­ing in the early ’70s. Today, Ja­maica is among the top five in­debted na­tions in the world with a to­tal debt ra­tio of 128 per cent of GDP. With a grad­u­ally de­pre­ci­at­ing cur­rency, Ja­maica’s for­eign-cur­rency debt-ser­vic­ing re­quire­ments con­tinue to in­crease. Ja­maica, once a pos­i­tive ex­am­ple to other de­vel­op­ing coun­tries who needed a recipe for de­vel­op­ment, is now an ex­am­ple of what not to do to if a coun­try wants its econ­omy to re­main sta­ble with low debt, high growth rates and pos­i­tive de­vel­op­ment ef­forts.

What chal­lenges have we faced?


Over the last 40 years, Ja­maica has en­coun­tered sig­nif­i­cant in­ter­nal as well as ex­ter­nal chal­lenges in its at­tempt to achieve eco­nomic growth, eco­nomic sta­bil­ity, and eco­nomic de­vel­op­ment con­cur­rently. After ex­pe­ri­enc­ing rapid eco­nomic growth and in­fras­truc­tural ex­pan­sion in the years im­me­di­ately fol­low­ing In­de­pen­dence in 1962, Ja­maica’s growth tra­jec­tory took a down­turn in the 1970s and to not re­cov­ered. Fail­ure of both fis­cal and mon­e­tary poli­cies in their at­tempt to bal­ance the mar­ket mech­a­nism has given the in­vis­i­ble hand the free­dom to de­ter­mine eco­nomic out­come in some in­stances, and it has. The global mar­ket has sold more goods and ser­vices to Ja­maica than Ja­maica sold to it. This has re­sulted in in­suf­fi­cient ac­cu­mu­la­tion of for­eign cur­rency needed to con­duct in­ter­na­tional busi­ness (for­eign-cur­rency-liq­uid­ity prob­lems). The na­tion’s for­eign cur­rency earn­ings is a cause for con­cern and is now more ques­tion­able since the lat­est signed ex­tended fund fa­cil­ity (EFF) agree­ment with the IMF which ex­pires in 2017. This pro­gramme dis­burses an agreed quota of for­eign cur­rency on a quar­terly ba­sis from 2013 to 2017 on con­di­tion that Ja­maica passes quar­terly re­view tests.

What will hap­pen after the IMF EFF con­cludes next year?

Now let us as­sume that Ja­maica sat­is­fies all the con­di­tions stip­u­lated in the EFF by the IMF, which con­cludes in 2017, then what? Will the im­ple­men­ta­tion of th­ese con­di­tion­al­i­ties be suf­fi­cient to en­sure long run sol­vency? What strate­gies are be­ing im­ple­mented to en­sure that if the IMF de­cides not to re­new the EFF, Ja­maica can gen­er­ate enough for­eign cur­rency on its own to sat­isfy lo­cal de­mand and for­eign obli­ga­tions? The is­sue of liq­uid­ity man­age­ment has brought it­self to the fore­front. In or­der to get a deeper un­der­stand­ing of how to ap­proach the sit­u­a­tion, it is im­por­tant to re­view the eco­nomic poli­cies and ex­change-rate strate­gies that Ja­maica has pur­sued lead­ing up to the cur­rent sit­u­a­tion. The coun­try must find in­ge­nious ways to earn or gen­er­ate for­eign cur­rency or must re­vert to more bor­row­ing when the cur­rent EFF ex­pires.


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