Phillips acknowledges IMF deal may not happen before January
Finance Minister Dr Peter Phillips on Wednesday sought to dispel notions that the ongoing negotiations with the International Monetary Fund (IMF) will be delayed, saying that at least the letter of intent would have been concluded by yearend.
He acknowledged, however, that the approval process could extend into the new year.
"There is no doubt that the negative conditions in world economy have affected us, and there is no doubt that confidence is under pressure because the market have determine that their litmus test of confidence hinges upon conclusion of negotiations, even though I have said there is no delay and we are moving in accordance with a timetable that was settled in the first discussion we had with the Fund," said Phillips at the monthly Mayberry Investors' Forum in Kingston.
"There is no doubt that we are well within the averages as far as negotiation of an agreement is concerned. Even with the last agreement signed by Jamaica and, in fact, there is no doubt that most companies contemplating merger or acquisition of another company would take longer in concluding it than we have had in these discussions," Phillips said.
He said the parties have already agreed that the new bailout programme would last four years.
The basic fundamentals of the agreement have been settled, but there are some technical issues that the IMF wants to discuss, he told the forum.
Referring to the October issue of the World Economic Outlook, Phillips said the assessment for the global economy was negative.
"So what the Fund says, in that context, is that they want to have a discussion about buffers or cushions or what measures can be contemplated in the event that these perspectives are realised," the finance minister said.
"There are some technical issues as to the range of possible options that have to be discussed, but the basic things are all settled matter," he said.
Back in early October, following the fund one-week visit to the island, Phillips had said that the Government and the IMF were in discussion on the draft letter of intent and that they were making good progress towards a yearend timetable for submission to the Fund.
However, a deal with the IMF would have to be approved by the Fund's board. Expectations are that the board review will not take place until next year.
confident re letter of intent
Phillips reiterated at the forum that he remains confident that the letter of intent will be submitted by yearend and was hopeful it would go to the IMF board for approval.
"Let me say that the discussions have taken place and there is fundamental agreement - mutual understandings between the Government of Jamaica and the Fund relating to structural reform, growth agenda, the duration of a programme which will be a four-year programme - and we have dealt with and settled issues relating to the overall public-sector deficit, the fiscal deficit, the wages-to-GDP ratio, the debt-to-GDP ratio, the levels of primary surplus and those fundamental issues," said Phillips.
"I am hopeful also that we could get to the board this calendar year, though I will grant the possibility - the month of December being as it is - that it may not be possible to get to the board this calendar year and it may be pushed back to January," he said.
A letter of intent lays out the economic reforms that a country is committed to making in exchange for receiving an IMF loan.
"This past week, we have officials of the Government of Jamaica in Washington DC looking at and exchanging information regarding our views on the memorandum of economic and financial policy which forms the basis of the letter of intent which is to be issued," Phillips said.
A letter of intent is a precursor to the signing of an agreement with the multilateral entity.
"I don't believe that there has ever been a case where a staff-settled letter of intent has ever been turned back from the board," the minister said.