What oversight for standby arrangement?
ONCE THE staff agreed its specific contours, it was always a mere formality that the International Monetary Fund’s (IMF) board would approve Jamaica’s new standby arrangement with the Fund, which Prime Minister Andrew Holness disclosed last weekend.
This agreement, which replaces the nearly ended, and successful, Extended Fund Facility (EFF) will put at Jamaica’s disposal US$1.7 billion, which it can call on in the event of exogenous shocks such as a sharp upward swing in oil prices or natural catastrophes that threaten the country’s macroeconomic stability.
The Fund’s oversight of the Government’s quantitative and quality management of the economy will be less intense under this programme than the last performance reviews – which will now be half-yearly rather than quarterly – but that doesn’t mean it will come without conditions. We will, however, know what the specific performance criteria are when Jamaica’s formal letter of intent to the Fund is published, which should be shortly.
There are some very important things that we do know. Not least of these is that Government’s diligence notwithstanding, the previous agreement was successful, in no small part, because of the work of the Economic Programme Oversight Committee (EPOC), under the leadership of Richard Byles, CEO of the Sagicor Group. Jamaica met the targets in 14 quarters before the EFF was superseded by the standby arrangement.
EPOC was, in several ways, unique. It was largely the idea of the Jamaican banking sector, which, having rescheduled huge chunks of the Government’s debt, wanted to be sure that they would be repaid their money. Its membership included the private and public sectors, as well as representatives of the trade union movement. They had access to government data.
There are two other critically important reasons that made this unique experiment successful. One is that Richard Byles provided outstanding and courageous leadership. Even when he was attacked by Audley Shaw, the current finance minister, who was then in Opposition, as a propaganda mouthpiece for the previous administration, Mr Byles didn’t flinch.
The second reason was related to the first. EPOC was transparent. It provided data and independent analysis on the economy and the prospects of meeting the IMF targets, on a regular basis, thereby, we believe, proscribing any inclination by the administration to cook the books. It helped, of course, that the banks funded EPOC’s operation, allowing them to put their findings in the public domain.
We have provided all this background out of, thus far, slight unease, with the Government’s configuration of cart and horse. We fear that they be off and running, with the horse in the rear.
The Government is committed to some kind of oversight group for the standby arrangement and the performance of the economy as a whole. What is concerning is that the public doesn’t yet know what this oversight looks like, what precisely it will monitor, who are its principals, and, especially, who will be its leader. There is an assumption that its mandate will be broader than EPOC, monitoring the performance of the wider economy, rather than the criteria laid down in the new letter of intent.
This newspaper has no objection to that broader approach, which seems to be within the remit of Prime Minister Andrew Holness’ Economic Growth Council, chaired by banker Michael Lee-Chin. We, however, like others, insist that there is need for separate, specific, and timely oversight of, and reporting on, the fiscal accounts, where governments are often disposed to doing mischief. The leadership of that group also needs to be publicly vetted for us to be certain that he/she comes at least close to the benchmark set by Richard Byles.