Jul 2016 Financial News

Gov't plans new, less strict IMF agreement. Shaw seeks lighter IMF load

Jul 13, 2016

Minister of Finance Audley Shaw has announced plans to continue with the reforms of the International Monetary Fund (IMF) come March 2017, but under a different approach from what the country is now guided by.

Shaw, who was speaking at the Private Sector Organisation of Jamaica (PSOJ) and Jamaica Money Market Brokers (JMMB) led annual economic forum at the Jamaica Pegasus hotel in New Kingston yesterday, said the Government of Jamaica (GOJ) is already in dialogue with the IMF to provide oversight through staff monitoring of the country’s economic programme when the four-year programme comes to end next year.

This successor programme, however, does not entail financial assistance or endorsement by the IMF Executive Board in line with what Jamaica is guided by under the current Intensified Surveillance programme with the IMF.

“The Government intends to engage the IMF in our economic programme and policy formulations after the expiry of the current programme in December 2016. Discussions have already commenced between the GOJ and the IMF on the format of a staff-monitored programme,” Minister Shaw told the audience.

The event was being held under theme ‘Developing beyond the IMF’.

“This successor programme will be instrumental in building on the achievements already made and tackling the challenge of achieving sustainable economic growth with fiscal consolidation and debt reduction,” he continued.

It means that Jamaica could see less belt tightening measures come next year, since the IMF will no longer be holding the country to strict budgetary parameters. But the decision by the Government to enter into a less restrictive agreement with the IMF has sparked major concern among members of the private sector and academia.

Executive director of the Mona School of Business and Management, Professor Densil Williams, yesterday argued that Jamaica’s economic state requires more than just staff monitoring by the IMF, noting that the country’s fiscal affairs cannot be left to the ‘vagaries of the political cycle’.

“The IMF engenders confidence in Jamaica, and we need that confidence. We still need another round of the IMF programme to further entrench fiscal discipline…with monitoring you can opt in and out as you like, so we need greater measures to stay focused,” he said.

According to Williams, the PSOJ should begin to lobby with the Government on the need to stick with the current austerity programme of the IMF, which has not only provided balance of payments support to the country, but from which Jamaica has benefitted in total disbursements of roughly US$748.2 million.

Last month, the country completed the combined 11th and 12th reviews under the Extended Fund Facility (EFF) for Jamaica, enabling a disbursement of approximately US$80. Jamaica has three quarterly reviews remaining under the four-year programme.

“I believe the question to ask is if the government programme has enough credibility without the IMF? What will be the implication for the economic development agenda?,” CEO of the PSOJ Dennis Chung questioned.

He added that the risks Jamaica faces without the presence of the IMF include international and local investor confidence in fiscal policy and the economy; lower funding or higher interest rates from multilaterals or private entities; and the worsening of macro indicators such as interest, inflation rates and debt-to- GDP ratio. “Consider effects on inflation and interest rates, and ultimately GDP growth and lives of citizens,” he said. “The general feeling is that Jamaica, and government, does not yet have enough international credibility to be without the IMF.”

Similar sentiments were echoed by senior economist and sovereign research manager at JMMB, Jermaine Burrell, who stated that the IMF has disclosed its position to move away from the staff-monitored programme as it has not brought forth the desired economic results.

“We need a programme with teeth, we need a programme that would mimic closely what currently exists, including quarterly reviews and tests, the utilisation of IMF expertise, but minus the borrowing arrangement.

“We need the maintenance of the Economic Programme Oversight Committee (EPOC) and continuous monitoring by civil society of fiscal rules, IMF reviews and the inviting ministers to speak on reviews,” he said.

Some critics, however, believe that the IMF programme has not helped Jamaica, but has actually worsened the economy.

Source:
BY KARENA BENNETT
bennettk@jamaicaobserver.com
Business reporter
Jamaica Observer
Wednesday July 13, 2016

http://www.jamaicaobserver.com/business/Shaw-seeks-lighter-IMF-load_66977