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Locals divided over Gov't, IMF subject

Published:Thursday | June 30, 2011 | 12:00 AM

Jamaicans are split over the Government's decision to extend its borrowing relationship with the International Monetary Fund (IMF), with the majority saying the state should tread carefully.

A Gleaner-commissioned Bill Johnson national opinion poll has found that 43 per cent of the respondents believe the Government was wrong in deciding to extend the IMF deal while 37 per cent gave the move the thumbs up and 20 per cent did not offer an opinion either way.

Jamaica is now well into the second year of a 27-month US$1.27-billion IMF loan programme, which commenced February 4, 2010, and Finance Minister Audley Shaw has started talks with the fund to extend the arrangement.

But Shaw will have to convince more than four in every 10 Jamaicans that this is a good move.

In justifying the resumption of a borrowing relationship with the IMF, 14 years after the P.J. Patterson government walked away from that institution, Shaw had argued that the country was facing tough times.

Shaw then pointed to a fallout in foreign-exchange earnings and capital flows; a scarcity of loan funds on the international capital market, as well as "the prospect of a severe contraction in the local economy beyond the present crisis", as he painted a picture of Jamaica being caught between a rock and a hard place.

"Jamaica has no real option at this time but to return to a borrowing relationship with the IMF," Shaw said.

Since then, he has repeatedly pointed to improvements in some macro-economic numbers as proof that the IMF has worked for Jamaica and that the country should seek to extend the deal.

"We believe that it is in the best interest of the country to continue its relationship with the IMF," Shaw told Parliament during the opening of the 2011-2012 Budget Debate.

Reinforce confidence

He argued that a continuation of the programme would send a positive signal, maintain stability, reinforce confidence, and provide the important factor of certainty to stakeholders.

But even as Shaw tries to extend the standby arrangement with the fund, an international think tank, the Center for Economic and Policy Research (CEPR), has warned that the agreement could worsen the country's debt burden and harm health and education.

CEPR last month published a paper that claimed Jamaica's economic and social progress has suffered considerably from the burden of an unsustainable debt and that even after the debt restructuring of 2010, this burden remains unsustainable and very damaging.

It said that pro-cyclical macroeconomic policies, implemented under the auspices of the IMF, have damaged Jamaica's recent and current economic prospects.