Editorial | Thumbs up for IMF deal
It is hardly surprising that we back the government's decision to enter a new agreement with the International Monetary Fund (IMF), although we wait further and better particulars of the Stand-By arrangement before that support is firmly locked in.
The specifics of the letter of intent, outlining the technical parameters of the deal - including the pace at which the government continues to write-down Jamaica's debt as proportion of the size of the economy - is, in this context, important. But it is not the only element. How Jamaica proposes to monitor implementation of its undertaking is critical to us.
As announced, the idea is that the new US$1.7 billion arrangement will come into effect next month, effectively replacing the four-year Extended Fund Facility (EFF) that would have come to end next March. For good form, the psychological benefit of successfully completing the entire programme, and to avoid any comparisons with the debacle of 2010, we would have preferred if the EFF had been allowed to run its full course. There is, nonetheless, appreciation of the logic and intent of what is being done. Indeed, few would question what has been accomplished with the reform of the Jamaican economy over the past five years.
Jamaica on edge
In 2012 Jamaica was at the precipice: debt to GDP was hovering at 150 per cent; the fiscal deficit was above six per cent of GDP; the current account deficit was 13 per cent of national output; the foreign reserves were sliding perilously; and global financial markets were rapidly closing to Jamaica.
The country has been pulled substantially back from the brink, based largely on a tough programme of fiscal containment. The debt-to-GDP ratio has fallen by 20 per cent; the current account deficit is low single digit; reserves are on the rise; investor confidence is up; and growth has returned to the economy.
These gains, however, are fragile. The Andrew Holness' administration, despite its criticisms of the IMF pact while in opposition, is working hard to entrench the relationship with the Fund and the gains that have come therefrom. Transitioning immediately to the Stand-By arrangement, from the EFF, is part of that effort. It removes the potential for a long hiatus between the completion of one programme and the start of another, and for any sapping of market confidence, domestic or international, that could flow from this.
Herein lies our concern about monitoring the agreement. The EFF worked in large measure because there was consensus around the reform project, helped, in no small part because of the oversight role of the Economic Programme Oversight Committee (EPOC) and its chairman, Richard Byles. They helped build public support for an effort in a low-trust society, in which confidence in governmental institutions falls behind others.
The performance criteria of the new arrangement will, per force, not be the same as the last, but we insist that the arrangement be transparently monitored, reviewed and reported on by a body that, if not EPOC, is similar thereto, whose leader has met the Richard Byles test of standards. Moreover, while the IMF's reviews under the Stand-By arrangement will be semi-annual, oversight reporting by the domestic oversight report MUST be quarterly, with significant emphasis of fiscal performance. Jamaica has come too far to squander the gains.