IMF review can mask realities
JAMAICANS READING IMF review recently must have been flying high and singing with gusto, “Ain’t no stopping us now, we are on the move, we are in the groove.”
But within days of that review, some manufacturers started complaining about the recent slippage of the Jamaican dollar. They argued this is going to push up the cost of imported raw materials, making it more difficult for them to stay competitive, so the Bank of Jamaica should intervene and reverse the recent devaluation. The minister of finance has since assured them that the current strong demand for foreign exchange is unwarranted and fuelled more by speculation and a certain amount of panic.
Next, the chief justice and the director of public prosecutions made public their disgust that with the Michaelmas term having started, measures put in place to clear the backlog of cases in the circuit courts were being undermined by inadequate staffing.
Following on that, the media highlighted Kingston’s ongoing problems with safety and security in the downtown area. It noted that thieves are literally in control of the business community in spite of a strong police presence.
With all this happening within days of our stellar IMF review, things might not be as rosy as
they appear, and, as the old adage goes, all that glitters is not gold.
The IMF’s rave reviews about Jamaica’s economic performance indicated quite candidly and unambiguously that the country’s economic programme continues to deliver strong results, which have been fuelling significant business and consumer confidence and increased job creation. The review stated further that the country has met all targets and structural benchmarks in the second six-monthly review under the precautionary standby arrangement, assuring it of an additional loan drawdown of US$180 million from the Fund. This would bring the total amount of loan funds the country can access to US$790 million.
Such laudatory achievement and
review would buoy the spirits of any nation, any government, any people, and make it difficult for someone like me to worry or publicly voice concerns about what’s taking place in the wider Jamaica.
The IMF is not the Government of Jamaica, but because it is a major lender which imposes conditionalities on the granting of loans and because it is so tight in its supervision of the country’s accounts and data its review carries much weight, and the Fund’s position in the socio-economic marketplace is indisputable and unchallengeable.
An extremely favourable review portrays a sense of good things happening throughout the economy. It also presupposes that Government is complying with the necessary budgetary and
public-sector reforms. If Government is faltering, who does the country turn to, having been lulled into believability by another impressive passing of an IMF test and another bullish review? That, for me, is a major worry.
For over four years while we were sailing through our initial quarterly tests under the then Finance Minister Dr Peter Phillips, the IMF kept warning us that we could not delay any longer implementing reform of the public sector. They are still warning us even after we have completed our last two half-yearly tests under our current minister of finance, Audley Shaw.
While our ministers promise ‘soon come’, our large and inefficient public sector ambles on, and according to the IMF team leader, Uma Ramakrishnan,“The extensive and inequitable system of allowances and the overall payroll structure continue.” She points out that achieving greater efficiency requires a scaling back of the roles, responsibilities, and overall size of the public sector. “Strengthening the procurement process would also ensure a timely execution of capital projects,” says Ramakrishnan.
There is nothing glamorous or earth-shattering about public-sector reform, but visionary and transformational change is also in the details, and Jamaica, in delaying public-sector reform, “adds significant risks and uncertainty to the Government’s fiscal accounts and inhibits the release of resources for much needed social and growth-enhancing spending”, notes Ramakrishnan.
For many in the society coping with continued high levels of inefficiency in the public sector, there is little comfort derived from impressive test scores and rave reviews. This is why Government must implement at once publicsector reform. Citizens know and can appreciate efficiency and performance; our passport office today, as against yesteryear, is living testimony.
Delays have consequences. For years, much to the dismay of the IMF, we kept kicking the can down the road as far as doing timely land valuations and phasing in property tax adjustments in accordance with agreed markers. During this time, municipalities and infrastructure were badly affected. We have been scoring impressively on our IMF tests and getting great reviews, but local markets, lighting, sidewalks, garbage collection, appropriate land-use policies, including those affecting illegal settlements, have suffered, and so have some people’s sense of well-being.
Government’s delay, in spite of the IMF’s warning in dealing in a fulsome way with pension reform, could have serious consequences in the years ahead. What we have is unsustainable, with imputed pension debt currently at more than 36 per cent of GDP, and the expected annual pension bill for this fiscal year at J$34.3 billion, a 130 per cent increase over 2010.
While Shaw has announced a phased implementation, which has yet to get under way, there are public-sector pensioners who have retired from last year and have yet to receive their pension, making their reality different from all the good things that are happening.
The IMF has indicated that crime and violence is a significant retardant of growth, and to date, we have not been able to effectively deal with it or assuage the fears of many, even though we have met all targets and structural benchmarks. There is a divergence between the language of success twinned with economic gains and some of the harsh realities on the ground. We need to start closing the gap.