Davies
Andrew Green, Staff Reporter
THE INTERNATIONAL Monetary Fund team leaves a more uncertain Jamaica today than when the group landed last week Tuesday.
Minister of Finance and Planning Dr. Omar Davies on Tuesday contradicted a previous ministry statement about the purpose of the visit. And some analysts say the IMF is laying the framework for Jamaica to start off a new borrowing relationship.
"The World Bank and IMF recommended some time ago that governments should provide all the information necessary to the public," said former government press agency boss Ken Chaplin. "They are encouraging ministries of finance to be as open as possible."
But the government is faced with a budget crisis, said economist Errol Gregory. "We need emergency action to correct the fiscal situation."
Economist Omri Evans is one of those who believe that under the present circumstances, there is no alternative to Jamaica returning to a more formal relationship, and possibly a borrowing one, with the IMF. But this would represent the reversal of a key government policy.
The arrival of the IMF team has sparked a major public controversy about the likelihood and implications of such a move.
The Finance Ministry is grappling with a mounting debt burden which topped $656 billion in October. The debt has grown by more than $50 billion since April, resulting from extensive government borrowing to finance maturing debt payments and central government operations.
October figures released by the Finance Ministry in November show that the Government has spent almost $99 billion since the start of the fiscal year, but has only taken $74.7 billion into the treasury representing an earnings shortfall of over $24 billion. Dr. Davies wants to avoid panic so he is not telling the public the extent of the crisis, financial consultant Orville Johnson said. The intention is good, but the result is to create uncertainty.
"Keeping the public in the dark does not help," Mr. Chaplin said. "People get suspicious if they feel the government is withholding information.
Dr. Davies did state at the start of the budget year in April that "we do have a national problem."
With the new $13.8 billion tax package in the budget, Dr. Davies said then, "We are confident that the measures which I have just announced will allow us to maintain the confidence of our creditors."
FOREIGN CREDITORS
But with the debt position worsening, foreign creditors are demanding a high premium to lend Jamaica their money. The is borrowing on the domestic market, which in turn is keeping interest rates high.
"He is in a defensive mode," said one public relations expert about the finance minister. "The country is not being prepared to cope with the situation."
The recent Private Sector Organisation of Jamaica-sponsored Partnership for Progress suggestion that government lower its interest cost by swapping high cost government paper for lower cost US indexed bonds is the type of thrust which can help deal with the crisis, Mr. Johnson said. "When you have a crisis, you need everyone on board."
A broad national consensus is required to address the crisis, Mr. Johnson said. "This is no time for a 'my way or the highway' solution."
