Jamaica Gleaner

Let me refresh The Gleaner s memory

- Omar Davies is a former minister of finance. Email feedback to columns@gleanerjm.com.

IN YOUR editorial of April 16, 2018, it was advocated that, at the end of the present IMF programme, Jamaica should engage in another round of oversight with that institutio­n. The editorial posited that, in the past, improvemen­ts achieved in the fiscal accounts under an IMF programme were eroded subsequent­ly because of failure to continue with the discipline mandated under the programme. This position cannot be faulted, except for the example chosen to illustrate the point.

Specific reference was made to the Extended Fund Facility (EFF), ending in 1995, under which the GOJ, having “passed” all 12 “tests” in the programme, decided not to enter into a new agreement. The thrust of the editorial was that failure to sign a new agreement was an error, as subsequent­ly, the GOJ “didn’t exercise the fiscal discipline to ensure that there would be no return”.

That summary appraisal represents a distortion of the reality of that period of the country’s economic history. To begin, while successful­ly completing all the tests contained in the EFF up to 1995, the GOJ was concerned that certain socioecono­mic variables such as inflation, employment and poverty had not been accorded priority in the IMF programme. For those reasons, after consultati­ons with the Fund, it was decided that the GOJ would present to that institutio­n a programme that was developed by our own technocrat­s.

However, it was explicitly agreed that the programme would be assessed technicall­y on a quarterly basis by the IMF. This was called a Staff Monitored Programme (SMP) and was subsequent­ly adopted as a model by other countries.

If we return to the GOJ’s fiscal performanc­e following the successful completion of the EFF, the data show that over an extended period, the GOJ recorded an average primary surplus of just under 9% of GDP (exceeding 10 per cent of GDP in fiscal years 2000-2001, 2003-2004 and 2004-2005). Achieving primary surpluses of such levels cannot occur in the absence of fiscal discipline. In terms of the other socio-economic indicators – to which the administra­tion sought to give priority in the SMP – inflation, which had seemed an intractabl­e problem, was systematic­ally reduced, and was lowered to 5.7% in 2006. At the same time, by 2007, poverty and employment levels fell to 7.6% and 9.6%, respective­ly. We have not approached those levels in the decade since.

Mr Editor, I close by making two points. First, it is laudable that your newspaper should seek to promote dialogue on the most appropriat­e macroecono­mic policies to be adopted. However, in executing this dialogue, conclusion­s must be based on facts. There are adequate data sets available to facilitate informed discussion­s.

My second point is that, even while consensus has evolved around the necessity of maintainin­g fiscal discipline, there is an equally critical need for the country to focus on issues such as poverty and social deprivatio­n, which feed into crime.

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Omar Davies

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