Thumbs up for IMF deal

Jamaica Gleaner - - OPINION & COMMENTARY -

IT IS hardly sur­pris­ing that we back the gov­ern­ment’s de­ci­sion to en­ter a new agree­ment with the In­ter­na­tional Mon­e­tary Fund (IMF), al­though we wait fur­ther and bet­ter par­tic­u­lars of the standby ar­range­ment be­fore that sup­port is firmly locked in.

The specifics of the let­ter of in­tent out­lin­ing the tech­ni­cal pa­ram­e­ters of the deal — in­clud­ing the pace at which the Gov­ern­ment con­tin­ues to write-down Ja­maica’s debt in pro­por­tion to the size of the econ­omy — is, in this con­text, im­por­tant. But it is not the only el­e­ment. How Ja­maica pro­poses to mon­i­tor im­ple­men­ta­tion of its un­der­tak­ing is crit­i­cal to us.

As an­nounced, the idea is that the new US$1.7 bil­lion ar­range­ment will come into ef­fect next month, ef­fec­tively re­plac­ing the fouryear ex­tended fund fa­cil­ity (EFF) that would have come to end next March. For good form, the psy­cho­log­i­cal ben­e­fit of suc­cess­fully com­plet­ing the en­tire pro­gramme, and to avoid any com­par­isons with the de­ba­cle of 2010, we would have pre­ferred if the EFF had been al­lowed to run its full course. There is, none­the­less, ap­pre­ci­a­tion of the logic and in­tent of what is be­ing done. In­deed, few would ques­tion what has been ac­com­plished with the re­form of the Ja­maican econ­omy over the past five years.


In 2012, Ja­maica was at the precipice: debt to GDP was hov­er­ing at 150 per cent; the fis­cal deficit was above six per cent of GDP; the cur­rent ac­count deficit was 13 per cent of na­tional out­put; the for­eign re­serves were slid­ing per­ilously; and global fi­nan­cial mar­kets were rapidly clos­ing to Ja­maica.

The coun­try has been pulled sub­stan­tially back from the brink, based largely on a tough pro­gramme of fis­cal con­tain­ment. The debt-toGDP ra­tio has fallen by 20 per cent; the cur­rent ac­count deficit is low sin­gle digit; re­serves are on the rise; in­vestor con­fi­dence is up; and growth has re­turned to the econ­omy.

These gains, how­ever, are frag­ile. The An­drew Hol­ness’ ad­min­is­tra­tion, de­spite its crit­i­cisms of the IMF pact while in op­po­si­tion, is work­ing hard to en­trench the re­la­tion­ship with the Fund and the gains that have come there­from. Tran­si­tion­ing im­me­di­ately to the standby ar­range­ment, from the EFF, is part of that ef­fort. It re­moves the po­ten­tial for a long hia­tus between the com­ple­tion of one pro­gramme and the start of an­other, and for any sap­ping of mar­ket con­fi­dence, do­mes­tic or in­ter­na­tional, that could flow from this.

Herein lies our con­cern about mon­i­tor­ing the agree­ment. The EFF worked in large mea­sure be­cause there was con­sen­sus around the re­form project, helped, in no small part be­cause of the over­sight role of the Eco­nomic Pro­gramme Over­sight Com­mit­tee (EPOC) and its chair­man, Richard Byles. They helped build pub­lic sup­port for an ef­fort in a low-trust so­ci­ety, in which con­fi­dence in gov­ern­men­tal in­sti­tu­tions falls be­hind oth­ers.

The per­for­mance cri­te­ria of the new ar­range­ment will, per­force, not be the same as the last, but we in­sist that the ar­range­ment be trans­par­ently mon­i­tored, re­viewed and re­ported on by a body that, if not EPOC, is sim­i­lar thereto, whose leader has met the Richard Byles test of stan­dards. More­over, while the IMF’s re­views un­der the standby ar­range­ment will be semi-an­nual, over­sight re­port­ing by the do­mes­tic over­sight re­port must be quar­terly, with sig­nif­i­cant em­pha­sis on fis­cal per­for­mance. Ja­maica has come too far to squan­der the gains.

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