Ronald Mason | Needed: new IMF pact with teeth
In December 2011, the winner of the general election was to engage in a major struggle to pull the economy of this country back from the edge of a disaster. This was different from our history of hiding from economic problems by expecting everything to just somehow turn out right.
Over the previous years, we had 'run wid it', instituted a high interest rate to sap liquidity, revalued the dollar and we fiddled with the economy to increase the likelihood of political success. The governments of the day cared very little about productivity, less about balancing the budget, and had a singular disdain for growth in the gross domestic product.
Four and a half years ago, the debt-to-GDP ratio was 145 per cent. We owed everybody that could be owed. We were paying the bloated public sector late, and creditors very late. As a society, we were beggars. The circumstances forced us back into the arms of the IMF, which is the lender of last resort. We entered into an extended fund facility that came with very stringent controls, hard targets and unrelenting monitoring. The agreement, set for four years, will expire in December 2016.
We have been forced to manage the economy with some semblance of national purpose. There is still a lot to be done, but our performance over the last three years has been commendable. The programme is not complete. The public-sector wage bill is still too high. Pension reform is still in gestation.
Debt-to-GDP ratio is still very high at 125%. GDP growth still flirts at one per cent per annum on average and now the flights of fantasy are wrapped in an unfounded belief that we not only know best, but have the capacity to make economic progress.
Delaying public-sector wage reform
This is now being expressed in floating the idea that we may not need a new IMF, or if we have any agreement, it must be purely for cosmetic purposes. We want to flirt with the idea of delaying public-sector wage reform to 2019 so as to provide a window for an intervening general election, because we are uncertain of the effect the wage reform could have on the country. We plan for very little on the things that could positively impact the economy.
Michael Lee-Chin accepts a position as growth czar, yet his bank, the largest financial institution in the country, would rather lend money to buy a depreciating asset than incentivise the SME sector. When there is a banking system where 78 per cent of the society has deposits and only 11 per cent have loans, this screams loudly for review and corrective action.
But we talk and talk and talk some more - and implement very, very little.
Some of the other obstacles to GDP growth are visible to everybody every day. We lack a trained workforce. Crime saps four to six per cent of potential growth. We generally have weak incentives to nurture entrepreneurial risk ventures. The infrastructure is abysmal and we lack adequate distribution of water to support the implementation of any growth plan. We lack a proper public transportation system that could accommodate the needs of second- and third-shift employment.
The BPO industry that is being promoted as a job creator must have people who have competent facility with the English language. They must be able to work differing hours to accommodate the North America time zone, much less the world at large. Saturday and Sunday banking is almost non-existent, so the country loses productive time to conduct banking transactions. The need of the banks to do online transactions does not fully reflect the lack of Internet penetration in the country. It also is not reflective of the low level of functional literacy in the society.
Struggling with literacy
We can talk and talk and talk some more about the strides the Jamaican educational system has made, but on the ground, the people struggle with literacy, numeracy and, most of all, comprehension. We need to do parallel things in the society and maintain the path of right-sizing the economy. The present flirting with this limitation of the IMF's role is not the way to go. It really is asinine.
The leaders do not inspire confidence. Don't for a moment tell me that I am expecting too much of the Government after only five months. After all, you said you had all the answers.
Much was made of the economic team that would be available immediately after an electoral victory. However, there was an even louder proclamation denigrating the passing of IMF tests at the expense of some fairy-tale people's tests. Running a country means operating the largest business in the land. All of us are shareholders and thus expect our share of the dividends. Promises are comfort to fools, and we are being treated like fools.
Engage the IMF, work diligently to a new programme for at least another four years to give us a platform to bring the debt-to-GDP ratio to below 100 per cent. Lobby to get the other ratios a little less stringent, but we must have very strong supervision with sanctions.
There must be specific targets with set timelines. Quarterly reviews are necessary now. No more will we have our leaders play games with our economic future for cheap political expediency. Coalition government, anyone? Oh for national unity.