Mark Ricketts | What grade did IMF give Jamaica?
Times are still tough because the fiscal consolidation has continued in order to reach the debt targets and to reallocate spending into growth-enhancing expenditure. - Uma Ramakrishnan, IMF mission chief for Jamaica
People don't usually score the scorer, the judge, the evaluator, the assessor, the auditor, as these individuals or institutions tend to be invested with absolute authority and final accountability. There is also a presumption of unquestioned impartiality, neutrality, and knowledge. I will sidestep tradition and convention and grade the IMF's assessment of our latest test.
On Tuesday, April 18, the IMF made public its first review under Jamaica's six-month-old standby arrangement (SBA) and the Fund was effusive in its praise of our performance. This can be highly beneficial as a confidence booster.
At the risk of being Scrooge or the Grinch that stole Christmas, in determining a final test score for Jamaica, I will incorporate some of the IMF's overall concerns as well as remind readers that the IMF is not Jamaica, and, ultimately, if we do not establish the right priorities, transform the public sector, hold our Government's feet to the fire, we might pass the IMF tests with flying colours but fail the people of Jamaica.
It is fantastic that in our first review, since our new agreement in November, the IMF regarded Jamaica's programme implementation as a strong performance. Uma Ramakrishnan pointed out that Jamaica met all structural benchmarks and all but one performance criterion, allowing the country another US$170 million drawdown from the US$1.64 billion it has access to over a three-year period.
At a specific level, the Fund highlighted several significant achievements, including the fact that inflation and the current account deficit remain contained. It noted as well that all the domestic confidence indicators are at an all time high, which is great news because confidence can be a key measure in driving financial and economic prospects.
ACTIVITIES AND CONFIDENCE
Economic growth is about activities, as well as confidence. A surge in confidence can have a decided impact on growth momentum. It could also alter the trajectory of investment undertakings already on the drawing board. In so far as the IMF provides us with upbeat language in evaluating our country's economic performance, such language, along with production realities, bolsters market strength.
The Fund goes even further in praising Jamaica. Constant Lonkeng Ngouana, IMF resident representative, reminds the nation in articles and speeches how far Jamaica has come. "Four years ago Jamaica was on the verge of an economic meltdown - net international reserves were below US$1 billion; the current account was in double digits; public debt was at around 150% of GDP, investor confidence was shaken; and the country was shut out of international capital markets, with looming financing risks.
"Currently Jamaica's landscape looks different; international reserves have nearly tripled; access to international and domestic capital markets has been restored; risks to the public sector's balance sheet have been significantly contained; and there have been several upgrades from credit-rating agencies."
All this suggests we are on a roll warranting a super-high test score, an A or A plus, or something in the upper nineties. The question is: Does that remarkable progress within four years suggestthat we are close to putting our house in order, and, if we are not, shouldn't our perception of an inflated score be discounted to a B minus or C?
In 2013 when we were negotiating the four-year US$958-million extended fund facility, the thinking was that if the necessary sacrifice was made, good things would accrue to us. Once that occurred there would be robust growth, unemployment would decline sharply, and government would be able to offset the country's infrastructural and social deficits.
Unfortunately capital formation was well below forecast and growth below expectations. The net result: IMF is back, this time providing us with a line of credit.
What happens if we underperform again under this new loan arrangement? Will IMF up the ante even further at the end of our three-year term? This question is real when we take into account that in the last few months we have slipped quite badly on the World Economic Forum (WEF) Global Competitiveness Index, on the Corruption Perception Index, and public debt, as a percentage of GDP, which had been moving steadily on a firm downward path, has recently stalled and, in fact, has had a slight reversal.
The IMF has always pushed Government to stop procrastinating and deal with the vexing issues of property taxes, pensions, and the size of the public sector, but IMF is not the Government, so, when we run into serious problems arising from the consequences of government procrastination and inaction, who do we turn to?
Then there are uncertainties: the upcoming wage negotiations; whether the social consensus for reforms can be maintained; and if major shifts in US policy could adversely affect Jamaica, e.g. the recently mooted (though reversed) tax on remittances.
While we are scoring big with the IMF, I sometimes wonder if Jamaica is another country. The Budget has just been passed, social dysfunction and crime are out of control, and the minister of national security tells the nation that besides limited resources, the JCF is currently short 3,000 police.
If IMF scores our macroeconomic performance, who scores the underperformance of government, who evaluates its ordering of priorities, and who remembers that the first task of government should be the safety and security of its citizens?
It is clear we can't divorce the IMF's assessment and recommendations from the overall performance of the country, therefore, in grading our recent test performance, I offer a B minus.