IMF deal still in place, despite 3 delayed tests

McPherse Thompson, Assistant Editor - Business

Finance Minister Audley Shaw said the quarterly reviews by the International Monetary Fund (IMF) under a standby agreement with Jamaica, were being delayed because of a number of measures the lending agency required the government to satisfy.

But he said the agreement was still very much in place and the Government was seeking to satisfy the review requirements rather than contemplate a renegotiation of the 27-month agreement entered into February 2010.

Among the outstanding issues, Shaw said, was the divestment of the debt-strapped Clarendon Alumina Production (CAP), which the Government was actively seeking to sell.

CAP has continued "to be an albatross around our necks," said Shaw said, addressing a financial planning exposition organised by the Financial Services Commission at The Jamaica Pegasus hotel, New Kingston yesterday.

Shaw was speaking ahead of an address to Parliament yesterday afternoon where he said he would provide more details of the issues leading to the delay in the IMF reviews, but told the Financial Gleaner there would be no renegotiation of the agreement.

He said that in the supplementary budget tabled in Parliament last week, "I have to set aside over J$5 billion to finance CAP because of a ruinous forward sale agreement that was entered into by the previous Government."

But the minister said "we are busily now in the process of seeking to divest it." Expressing confidence that it would be divested, he said "we have sold Air Jamaica, we have sold the Sugar Company of Jamaica, and the next target is the Clarendon Alumina Production."

Noting that the failure of the IMF to undertake reviews for the December 2010, March 2011 and June 2011 quarters was a topical issue, the finance minister said "it is no secret that it was held up, in part, due to the Government's decision that it would settle the outstanding wage issues with the public sector."

Both the Government and the IMF, he said, were concerned that "it could, in the future, become a disruptive force, if we didn't deal with it, because we had an agreement. It was a seven per cent that was outstanding and the court had even ruled that we should pay."

It was on that basis that "we decided, in the middle of the fiscal year, to deal with it, and in terms of the arrears to deal with that in the medium term."

Shaw said that as a result of that decision, it has impacted on the medium-term economic programme. "And so we had to recast our projections within that context and we had to look at how we are going to accommodate it properly going forward."

He said the Government was now dialoguing with public-sector workers to agree on a formula going forward for wage settlement "because it cannot be that you have memoranda of understanding over the years and that you programme increases, but that those increase have no bearing on the country's capacity to pay."

In that regard, said Shaw, "We have to look at wages in the future that are based on growth in the economy, growth in revenue, incremental growth in productivity - productivity is not the preserve of the private sector alone. Productivity is the preserve of public-sector workers as well."

Government has committed in its agreement with the IMF to cut the wage bill to nine per cent of GDP by 2016 and reform taxes.

Shaw said Thursday a Green Paper on pension reform would be tabled in Parliament by next week "because pension in the public sector is yet another major emerging problem that we have to deal with."

mcpherse.thompson@gleanerjm.com