Looking ahead for Jamaica and the IMF

By Marcia Forbes, PhD
CJ Contributor

Jamaicans Fear IMF’s Exit

Everyone in the room wanted Jamaica to remain in a strictly monitored formal IMF programme, complete with sanctions for missed targets. Some scoffed at the Staff Monitored Programme that Finance Minister Audley Shaw informed the gathering would come as of April 2017, at the end of the current Extended Fund Facility (EFF).

Many proffered that a Staff Monitored Programme (SMP) has no ‘teeth’ since it cannot apply sanctions and that Jamaican politicians really need something with bite to keep them in line. The room echoed ‘run with it’; an expression used by a former Finance Minister and which has come to be synonymous with reckless spending by politicians.

The foregoing are the sentiments I gathered from those in attendance at the Private Sector Organization of Jamaica’s Annual Economic Forum titled, ‘Developing Beyond The IMF’. University of the West Indies Professor, Densil Williams, hammered home hard about Jamaica’s reckless fiscal management since the country’s independence from Great Britain some 54 years ago. He highlighted that Jamaica has run fiscal surpluses only 18 times over those 54 years. That dismal performance represents a failure rate of 66%.

Williams insisted that a formal IMF Programme from 2017 to about 2022 would help to entrench fiscal responsibility in the Government and engender confidence in Jamaica among investors.

IMF Extended Fund Facility versus Staff Monitored Programme

The youngest presenter at the Forum, Jermaine Burrell, Senior Economist and Sovereign Research Manager at JMMB (a sponsor of the event), highlighted a note-worthy situation facing Jamaica as it manoeuvres its way to fiscal prudence and progress. This country no longer has a balance of payment problem. In light of this achievement, as Burrell noted, the normal IMF rules for an EFF no longer apply so the country is not in a position to apply for an extension of this facility.

One IMF factsheet available via its website points out that through an EFF, the Fund can assist a country that is facing “serious medium-term balance of payments problems because of structural weaknesses. Minister Shaw took great pleasure in highlighting Jamaica’s present primary surplus of $14 Billion in excess of the target, revenues at 7% above target for the Quarter ending June 2016, a 40-year inflation low of 2% and a declining national debt, moving down from more than 140% to now 124% of GDP.

While an Extended Fund Facility only allows draw-down of tranches when set targets are achieved, a Staff Monitored Programme (SMP) has no tranche conditionality. An SMP is an informal arrangement with the IMF for it to monitor the Government’s economic programme based on performance benchmarks. Under this arrangement the Executive Board of the IMF does not provide formal endorsement.

Intensified Surveillance by the IMF

What was clear from the forum is that Jamaicans want their Government held accountable for the management of the fiscal affairs of the country. Burrell mentioned an intensified surveillance programme wherein the IMF would conduct quarterly reviews and tests as it keeps the Government in line to achieve a credible debt management strategy.

Holding his line regarding the need for a formal structured programme, Williams argued for a negotiated agreement with the IMF that would facilitate such a programme. In light of knowledge that the IMF has previously made concessions to Jamaica, such negotiations seem entirely feasible and desirable.

Critical Role of Civil Society 

In looking to develop beyond the IMF many cited the critical roles of the private sector and civil society in charting the way forward. Working with the Government, as demonstrated by the Economic Programme Oversight Committee, Energy Sector Enterprise Team and the Partnership for Jamaica, is an excellent way to build social capital, something that is well-needed in Jamaica.