Government starts discussion on IMF staff-monitored programme
Minister of Finance and the Public Service, Audley Shaw said the Jamaican government has started discussions with the International Monetary Fund (IMF) on the format of a staff monitored programme to replace the four-year extended fund facility which ends this year.
He said the government intends to also engage the IMF in the government's economic programme and policy formulation after the expiry of the current programme in December.
Noting that the staff monitored programme "will be somewhat different from the current extended fund facility", Shaw said the 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.
"I want to make it absolutely clear that this government is not hesitant whatsoever to continue some form of engagement and monitoring with the IMF," the Finance Minister told participants at the annual economic forum of the Private Sector Organisation of Jamaica (PSOJ) at the Jamaica Pegasus Hotel, New Kingston yesterday.
A staff-monitored programme is an informal and flexible instrument for dialogue between the IMF staff and a member country on its economic policies.
Under a staff-monitored programme, the country's targets and policies are monitored by the IMF staff, but is not supported by the use of the Fund's financial resources and it is not subject to the endorsement of the Fund's executive board.
However, there was clear consensus among business leaders and academia, including PSOJ chief executive officer Dennis Chung and Mona School of Business and Management executive director, Professor Denzil Williams, that successor programme Jamaica should seek to negotiate with the IMF beyond the current one should be such that it holds the government to measurable targets and sanctions if they are not met.
They also want the Government to retain the Economic Programme Oversight Committee to continue overseeing any successor programme it agrees with the Fund.
Like others, Williams argued that a staff-monitored programme was not enough and that Jamaica needs another strenuous round of the IMF programme to further entrench fiscal discipline because "we cannot leave our fiscal affairs to the vagaries of the political cycle."
However, conditionalities such as those imposed under the extended fund facility are meant to safeguard IMF resources by ensuring that the country's balance of payments will be strong enough to permit it to repay its loan.
But Jamaica is not currently experiencing a balance of payment problem and hence, under IMF rules, the country would not be able to enter into another extended fund facility at this time, according to Jermaine Burell, senior economist and sovereign research manager at Jamaica Money Market Brokers.
In the circumstances, rather than negotiating a staff-monitored programme, Burrell would rather an intensified surveillance programme.
Shaw said the government "intends to operate in a transparent manner and to expend our funds and manage the budget in a transparent and predictable pattern and that is why we have no problem whatsoever in continuing in a relationship with the IMF."
The IMF oversees the international monetary system and monitors the economic and financial policies of its member countries, an activity known as surveillance.
As part of this process, which takes place both at the global level and in individual countries, the IMF highlights possible risks to stability and advises on needed policy adjustments.
Beyond the IMF surveillance, however, "this government will be aggressive in ensuring that there is a balance between maintaining fiscal discipline and economic growth," Shaw said.
He said that "a singular approach focusing on austerity cannot ensure that we achieve the growth necessary to attain lasting prosperity for the people."
He added that "we intend to maintain a stable macroeconomic environment conducive to growth led by the private sector. Our government has always had the policy that the private sector is the main engine of growth and that will continue to be so," the Finance Minister assured.
He said the government intends to take decisive measures to keep fiscal policy on track and "we'll also ensure that there is a cultural shift in government's approach to fiscal management."
Referring to the fiscal responsibility framework and other reforms undertaken since 2011, Shaw said those are major and significant changes that have transformed how the public sector operates.
"These initiatives will serve to provide a structured environment within which to operate and enable us to keep our fiscal house in order as we strive for growth and prosperity outside of a formal IMF agreement," he said.
Shaw said the theme of the forum, "Developing beyond the IMF", was timely as it provided the opportunity for the sharing of different policy perspectives on the medium and long-term development of the Jamaican economy beyond the current IMF programme.
There are three more quarterly reviews remaining of the 15 reviews under the four-year programme, which comes to a contractual end in December 2016 with the last formal review in March 2017.
"This new government remains committed to continuing reforms under the programme with a focus on maintaining fiscal discipline while achieving equitable growth through increased capital spending and strengthening of the social safety net," the finance minister said.