EDITORIAL - The IMF, Cabinet and the retreat

Published: Friday | January 11, 2013 Comments 0

We are not as concerned as most that Jamaica hasn't yet concluded a borrowing agreement with the International Monetary Fund (IMF). For failure to conclude a deal will further narrow our options in the financial markets and perhaps force us into a cold-turkey kicking of our borrowing habit.

Our greater fear is that the Government lacks the will to implement the policies that, with or without an IMF agreement, will be necessary if Jamaica is not to be sucked irretrievably deep into a fiscal black hole around which we have thrashed for too long.

The core of Jamaica's crisis is that we have become a debt junkie, which shows in our national debt that at upwards of 140 per cent of gross domestic product rivals Greece and is worse than most of Europe's other sick economies.

The difference between the European PIIGS and us is that they have acknowledged their problem. We, for the most part, remain in denial.

Yet, the servicing of Jamaica's debt demands nearly 60 per cent of the Government's Budget, leaving little to cover all other State expenses. Even more stark is that all the taxes collected by the Government are merely enough to service the debt and contribute a little bit to the payment of wages.

BORROW TO CLOSE THE GAPS

Until now, despite some half-hearted efforts to spend less, the Government's primary solution has been to borrow to close the gaps. It is, however, becoming increasingly difficult to find lenders. When they are found, they demand higher risk premiums for their money.

We would expect that by now the logic of Jamaica's need for fiscal containment was so compelling that even a populist government would have embraced it - which the Simpson Miller administration says is the case. Indeed, the finance minister, Peter Phillips, even insists that a series of programmes being promoted as being part of the IMF's agenda are, in fact, of Jamaican design and ownership.

These include:

A lower public-sector wage bill relative to national output;

A pension system to which government workers contribute more;

A tax that is more efficient and in which the finance minister doesn't have the power to throw around waivers; and

A public sector structured for efficiency and the delivery of service.

But, despite a hunky-dory Sunday-evening broadcast by the PM and an upbeat one-year report card by some of her political lieutenants, the Government has done little to implement these admittedly difficult policies. Nor has it articulated a clear economic path for the country.

The administration, however, still has an opportunity to do something. Ministers and other senior members of the Government ought by now to be in a special session reviewing policies and programmes. They must not emerge from this retreat until they have a definitive economic agenda and a timetable for its implementation - with or without the tutelage of the IMF. It will be easier to count on global support if external partners perceive us to be making the adjustments ourselves.

The ministers at the retreat should bear two things in mind: that they are all accountable and will be held to be so; and that, as bad as things are, they can get worse. The latter should not be the chosen option.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.

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