Mar 2012 Financial News

IMF review team coming

Mar 01, 2012

INTERNATIONAL Monetary Fund (IMF) officials are to arrive in the island by the middle of the month to conduct reviews, paving the way for Jamaica to enter formal negotiations for a new programme with the multilateral agency.
Finance Minister Peter Phillips -- who made the announcement in the House of Representatives yesterday, while reporting on his visit to Washington, DC between February 14 and 17 -- said the IMF has "expressed a willingness to work with Jamaica to develop a new programme".

Finance Minister Dr Peter Phillips (right) in discussion with Luis Brewster (left), who headed the International Monetary Fund (IMF) team to Jamaica; Gene Leon (2nd left), the IMF’s head of mission in Jamaica; and Dr Wesley Hughes, financial secretary, at a news conference earlier this year at the finance ministry. (Photo: Garfield Robinson)

Said Phillips: "We met with Christine Lagarde, the managing director of the International Monetary Fund, along with other senior IMF officials. This meeting was of particular importance given the breakdown of the Stand-by Agreement between Jamaica and the IMF and Ms Lagarde expressed the willingness of the fund to work with Jamaica to develop a new programme."

According to the finance minister, the willingness of the IMF top official to meet with the Jamaican delegation was "reflective of the fund's confidence in the determination of the [new] administration to pursue policies of fiscal sustainability".

Dr Phillips said the IMF team will be in the island from March 17-20 to conduct a review which will serve as the start of formal negotiations for a new programme.

At the same time, Phillips, who also met with the World Bank and the Inter-American Development Bank for discussions while in Washington, said the international partners have demonstrated a clear understanding of the extremely difficult economic condition that Jamaica and the new administration face.

"... Apart from the decline in key indicators, particularly on the fiscal front, the most significant obstacle in the discussions with the Washington-based institutions was the loss of credibility that the Government is facing due to the failure to carry through commitments made under the IMF Stand-by Agreement," Dr Phillips said.

He, however, told the Parliament that "inspite of this", the international partners have expressed a clear willingness to work with the new Government to overcome the current difficulties provided that the country was prepared to undertake the necessary actions and commitment to rebuild its credibility and place the economy on the path of sustainable growth.

The former government resumed a borrowing relationship with the Fund in 2010 but was unable to meet several of the targets under the Stand-by Arrangement, causing much uncertainty over the country's future under that relationship.

Yesterday, former Finance Minister Audley Shaw took Dr Phillips to task in a fiery defence regarding his statements about the inept handling of the Stand-by Arrangement by the former government. "The charges of a breakdown of trust with the multilaterals by the previous government is false, absolutely false," Shaw told the House. He said if that had been the case, the country would not have benefited from several low-interest loans from multilaterals which were only granted because of the fiscal programme of the then administration.

"It is time to stop the blame game, time to get on with the work," Shaw said, while demanding that Phillips instead address how the Government would be handling the decline in the dollar as well as the timeline for the reform of the tax system now being pursued, among other things.

Dr Phillips, however, stuck to his guns, saying that but for two reviews the country had failed to successfully complete the others. "I am not trying to blame him, I am simply stating a matter of fact," the finance minister said.

Addressing Shaw's concerns about the tax reform agenda, he said the discussions on the Green Paper, which is now being carried through by a Parliamentary Committee, will not be extended with the window for submissions from the public now closed, opening the way for a report to be prepared.

And in a retort to queries from Opposition Leader Andrew Holness as to "what would be new in the agreement" the government is now seeking with the IMF, Dr Phillips said: "One new feature is that we are here (pointing to their place on the Government benches) and you are there (pointing to the Opposition's place in the House)... and having observed some of the errors made when you were here, we at least have that as a guide".

He said one area in which the previous government had erred was in entering dialogue with the fund before approaching public sector workers about its plans to settle outstanding wage agreements, putting itself in an "untenable" position. The finance minister said the hope was that a new agreement would be inked in the coming fiscal year, which starts on April 1.


Source:
BY ALICIA DUNKLEY
dunkleya@jamaicaobserver.com
Observer senior reporter
Jamaica Observer
Thursday March 1, 2012

http://www.jamaicaobserver.com/news/IMF-REVIEW-TEAM-COMING_10931694#ixzz1nrrgtmcF