Omar Davies | Let me refresh The Gleaner’s memory
In your editorial of April 16, 2018, it was advocated that, at the end of the present IMF programme, Jamaica should engage in another round of oversight with that institution. The editorial posited that, in the past, improvements achieved in the fiscal accounts under an IMF programme were eroded subsequently because of failure to continue with the discipline mandated under the programme. This position cannot be faulted, except for the example chosen to illustrate the point.
Specific reference was made to the Extended Fund Facility (EFF), ending in 1995, under which the GOJ, having "passed" all 12 "tests" in the programme, decided not to enter into a new agreement. The thrust of the editorial was that failure to sign a new agreement was an error, as subsequently, the GOJ "didn't exercise the fiscal discipline to ensure that there would be no return".
That summary appraisal represents a distortion of the reality of that period of the country's economic history. To begin, while successfully completing all the tests contained in the EFF up to 1995, the GOJ was concerned that certain socio-economic variables such as inflation, employment and poverty had not been accorded priority in the IMF programme. For those reasons, after consultations with the Fund, it was decided that the GOJ would present to that institution a programme that was developed by our own technocrats.
However, it was explicitly agreed that the programme would be assessed technically on a quarterly basis by the IMF. This was called a Staff Monitored Programme (SMP) and was subsequently adopted as a model by other countries.
If we return to the GOJ's fiscal performance following the successful completion of the EFF, the data show that over an extended period, the GOJ recorded an average primary surplus of just under 9% of GDP (exceeding 10 per cent of GDP in fiscal years 2000-2001, 2003-2004 and 2004-2005). Achieving primary surpluses of such levels cannot occur in the absence of fiscal discipline. In terms of the other socio-economic indicators - to which the administration sought to give priority in the SMP - inflation, which had seemed an intractable problem, was systematically reduced, and was lowered to 5.7% in 2006. At the same time, by 2007, poverty and employment levels fell to 7.6% and 9.6%, respectively. We have not approached those levels in the decade since.
Mr Editor, I close by making two points. First, it is laudable that your newspaper should seek to promote dialogue on the most appropriate macroeconomic policies to be adopted. However, in executing this dialogue, conclusions must be based on facts. There are adequate data sets available to facilitate informed discussions.
My second point is that, even while consensus has evolved around the necessity of maintaining fiscal discipline, there is an equally critical need for the country to focus on issues such as poverty and social deprivation, which feed into crime.
- Omar Davies is a former minister of finance. Email feedback to firstname.lastname@example.org.