Jun 2010 Financial News

Gov't to hurdle next IMF test despite Tivoli shock - analysts

Jun 02, 2010

In spite of a fallout in revenues resulting from the recent several days of civil unrest in west Kingston, economic analysts are upbeat that the situation will not significantly affect the Government's fiscal targets and consequently its ability to hurdle the upcoming second quarter test under its existing borrowing programme with the International Monetary Fund (IMF). This would clear the way for the injection of another tranche of IMF funding under the existing programme.

"Given the civil unrest, this will affect Government of Jamaica's revenues, GDP (Gross Domestic Product) and therefore affect planned targets," said Mark Croskery, president and chief executive officer of Stocks & Securities Limited.

But Croskery said he did not foresee this being an issue, though it represented an extraordinary or unforeseen circumstance.

"We would expect dialogue between GOJ and the IMF accordingly," he further said.

Risks still high

In May at its first quarterly review by the IMF, Jamaica met with relative ease, all its quantitative performance criteria without the need for waivers. The success afforded the country a drawdown of US$100 representing special drawing rights of $63.7 million or 23.3 per cent of its quota. While the IMF in its statement said that it was impressed with the level of commitment by the authorities to the economic programme, it had noted that the risks to the agreed policies still remain high. These risks it said, included external and domestic shocks.

Results of the second quarter review are to be released by August for assessment of the three-month period up to June. A successful outcome of that review will give the country yet another $31.9 million in special drawing rights of the total $820.5 million, which Jamaica is entitled to under the IMF agreement signed in January of this year.

Edmund Bartlett, the tourism minister, has already estimated that the sector could see a fallout in revenues of up to US$350 million arising from the west Kingston flare-up. Tourism is among the country's top three foreign exchange earners. Merchants in the west Kingston business district have also reported that they have already lost up to J$600 million from businesses being closed during the unrest.

Still, analysts contend that no major fallout is expected.

"Yes, taxes collected would have fallen but it would be very surprising if there is a major fallout," said financial analyst, John Jackson.

Fallout not as significant

The economic fallout will not be as significant as many people may have suggested, he said.

'There are both positives and negatives, the biggest (positive) would probably be in the area of (lower) fuel consumption," Jackson noted.

Jackson also contended that the Government would have built in the programme some amount of shock absorbing capacity to cushion any blows developments such as the violent stand-off between gunmen and the security forces represented, thereby resulting in a relatively small overall impact.

"There is no major impact, the two or three days of production lost is less than one percentage point of GDP, nominally about $12 billion or so which is negligible," Jackson said.


Source:
Sabrina Gordon, Business Reporter
sabrina.gordon@gleanerjm.com
Jamaica Gleaner
Wednesday June 2, 2010

http://jamaica-gleaner.com/gleaner/20100602/business/business5.html