Wed | Aug 23, 2017

Editorial: Engaging the IMF

Published:Monday | February 29, 2016 | 2:00 AM

Andrew Holness has, quite sensibly, moved quickly to engage the International Monetary Fund (IMF), hoping, we assume, to recalibrate the tone of his party's relationship with the fund, which could be crucial to Jamaica's economy. Last Friday, the day after Mr Holness' Jamaica Labour Party (JLP) won Jamaica's general election, the prime minister-designate spoke with the IMF's resident representative, Bert van Selm, and hopes, with his economic team, to have a broader session with IMF technocrats this week.

The reasons for Mr Holness' alacrity on this front are as obvious and they are varied. But it can be synthesised into a single idea or phrase: Jamaica needs the IMF. So, Mr Holness has to convince the fund that the package of spending, including big tax breaks to some categories of workers promised by his party during the campaign, won't derail the island's existing fund-backed economic reform programme, which the JLP has pledged to honour.

There is important context here. When the JLP last formed the Government between 2007 and 2011, it had a support pact with the fund which quickly ran aground because the administration was irresolute in delivering on performance targets. Its successors, had it not been thrown out by voters last week, have been formally told that it met last December's fiscal and other benchmarks for its 11th consecutive success in quarterly reviews. And it appeared on course for the 12th.

But meeting those targets, including a primary surplus of 7.5 per cent of gross domestic product (GDP), required imposing fiscal austerity, for which it was often mocked by Mr Holness' party, especially its shadow finance minister, Audley Shaw, who was in charge when the previous agreement crashed and is set to be at the helm again. Indeed, Mr Shaw labelled a visit to the island by the IMF's chief and her praise for the outgoing Government's management of the programme as interference in Jamaica's affairs.

 

IN LINE FOR SUCCESS

 

Mr Holness, with five more quarterly reviews to go, wants to get the angst behind him, retain the fund's imprimatur and, if he can, persuade the IMF to reduce further - recently lowered to seven per cent of GDP - the primary balance target. The first of the reviews under Mr Holness' Government will be for the current quarter ending March. Most things appear in line for success, but things could possibly slip - especially the need to generate a primary balance of J$60 billion in the quarter - if there is not robust attention by the new managers at the finance ministry.

It is possible that Mr Holness' Government will be without another, and useful, level of oversight of the programme, a public-private sector group that monitored performance against targets and reported to the public. Richard Byles, the CEO of one of Jamaica's publicly traded companies, has been the group's spokesman. Unfortunately, Mr Shaw perceived Mr Byles' regular announcement of the positive outcomes, relative to targets under the agreement, as partisan declarations in favour of the Government. He once branded him a "mouthpiece" for the then governing party.

Mr Byles' Economic Programme Oversight Committee (EPOC) was unique and useful in holding the Government to account. Others have replicated the model. It would be a shame if it folded in Jamaica. It may mean eating a bit of crow, but Mr Holness should invite him to stay.