While IMF jitters continue ...
Ian Boyne, Contributor
The demands had been insistent, persistent and potent: Tell us more about this International Monetary Fund (IMF) deal; tell us what it will entail, what it will demand and, most important, when we will finally have it. The major private-sector organisations had spoken, the talk shows had been dominated with IMF talk, and the market itself had been speaking clearly.
Last Monday, it was time - some would say past due - for the prime minister and the finance minister to speak more definitively about the issues. What they said, while not satisfying all the demands for concrete information, did mollify and appease many, including The Gleaner, which did not send them back in retreat as it had threatened. But the fact of the matter is that we still don't know or have any firm idea of when a deal is likely to be concluded.
Opposition Spokesman Audley Shaw, in his release reacting to the press conference at Jamaica House, said that while "the minister made reference to new taxes, the elimination of tax waivers and a liability management programme", there was no indication of "a time frame for the appropriate consultations with critical stakeholders in the implementation of these initiatives". According to Shaw, "The country was still in the dark about the IMF."
Continued Shaw: "So after a three-day Cabinet retreat, we have not been told the specifics of the prior-action requirements and the timetable for implementation in order to secure a new agreement with the IMF." It was his view that "this apparent state of confusion will continue to fuel uncertainty, leading to more slippage in the exchange rate, rising prices and further decline in the economy as a result of a wait-and-see attitude being taken by investors."
The fact of the matter is, howls and demands for more information aside, the Government cannot say what it itself does not know. The negotiations are still going on. Apparently, there are sticking points. Apparently, the negotiations are tough, with a lot of back and forth. Some things are up in the air. There is genuine uncertainty about some things. Mr Shaw asked for some specific things in his release last Tuesday, which, it seems, that the Government itself does not know at this point. He asked for a list of all the prior actions to be implemented before an agreement is inked. It seems from what I take from Minister Phillips' comments on Monday that up to that point, those prior actions were still subject to negotiations and give-and-take.
Shaw asked for specific information in relation to public-sector wages and a timetable for implementation of tax waivers, the liability management programme, as well as for a "firm time frame for the agreement with the IMF".Well, I don't think either the prime minister or minister of finance knows the answer to that.
The minister of finance gave a specific piece of information which the hungry media have been feeding on all week: The primary surplus is to move from 6.3% - which we won't meet this year anyway - to an even more ambitious 7.5%. This means billions more in new taxes or cuts, or, more likely, both. So, that we know for sure. But we still don't know when these taxes will hit and in what areas.
The fact is, that even without that press conference on Monday, we had reason to know that any new IMF agreement - whenever we finally manage to secure it - would involve more taxes, more expenditure cuts, a public-sector wage freeze, if not a cut, and, generally, more hardships and pain. Peter Phillips might have given us a specific figure to chew on because we were bullying him and the prime minister for specifics, but even without that, we would have known that the adjustment would be hard, swift and painful.
calm public jitters
The Government did the right thing to hold that press conference and to get some powerful people off their backs for a while and to calm public jitters, but we still don't know a lot of critical things. And that is understandable, for these negotiations can't be conducted in public. Government can't leak details to the press while still negotiating. And the IMF would not be giving them permission to reveal its (the IMF's) hand in specific ways before the deal is finalised.
Minister Phillips was careful to say that on the matter of waivers and incentives, there has been a meeting of the minds. And clearly the Government has accepted, too, that the primary surplus has to be increased, for in listening to Peter Phillips many times, it is clear that he is really serious about tackling our debt albatross. And I also picked up from him in that press conference taking a 7.5% primary surplus is a better option than some others that could have been on the table.
There is a far more fundamental issue than when exactly we will sign an IMF deal, as critical as that truly is. Markets, indeed, abhor a vacuum. The far more critical issue is that with or without an IMF agreement, there are some tough, unpalatable decisions which we, as a country, must take. I think we should focus on that, realise how much all of us have at stake, and then unite around some common objectives. We also must not give any opportunity for politicians to exploit this crisis and our suffering for their own political advantage.
If we hold Andrew Holness and Audley Shaw to their own words, there is considerable agreement and consensus between what they see as the way forward and what the Government is saying. There is one very important but overlooked positive in the Jamaican political environment today, and that is that unlike other periods when there were sharp and explosive ideological differences about fundamental economic issues, today there is remarkable political consensus on economic strategy. Now there is a potential downside to that, in that minority voices are shut out of the public space and people like Lloyd D'Aguilar are not given enough voice in mainstream media to express their radical, if unworkable, views.
I have no doubt that Lloyd's views are utopian and impracticable, but they should be given voice. Today, both Andrew Holness and Portia Simpson Miller agree that bitter medicine has to be administered. Both agree that public-sector wages have to be constrained. Andrew Holness knows that public-sector wage increases cannot be entertained. He knows that the debt has to be paid down and that it can't be business as usual where that is concerned. So I don't see him, in has heart of hearts, having a problem with a 7.5% primary surplus.
Because, mark you, if you don't increase the primary surplus, you can take other steps which might be equally, if not more, painful. So when people start feeling the pain; when public-sector workers start paying more for pensions, bus fares, food, clothes, medicine, rent, and every striking thing, Andrew can't now say, if I were in charge, there would be no pain. You wouldn't be suffering. Andrew knows - and has preached openly and honestly - that bitter medicine is what Jamaica needs to deal with its economic disease.
The World Bank's Global Economic Prospects Report, just issued last week, has put Jamaica's projected growth rate for this year at the absolute bottom of the league in our region, with even Haiti and Guyana being way ahead of us. The World Bank projects that Haiti will grow by 6%, Guyana by 4.8%, while economic laggard Jamaica will grow (if we are lucky) by a paltry 1%. The prime minister has talked about some big projects to come on stream this year, but those will not be enough to give us the growth and economic traction we need to avoid the fire. There is no alternative to the bitter medicine.
There is no non-IMF path in the sense of a painless path. Any party we put in Jamaica House, any path we take, it will be pain, pain, pain. Get that into your head and make no politician fool you. In fact, both Portia Simpson Miller and Andrew Holness should go on a joint campaign to help Jamaicans understand that there are certain things which we, as a country, must do to survive, let alone grow. Our lenders are wary of us. They won't keep lending us unless we change our ways.
Cursing the IMF is one thing, but even if we don't have it, we would be foolhardy to think that populist policies will save us. The PM and Peter Phillips say they are ensuring that the most vulnerable will be protected. Well, we know that because social protection of the vulnerable is now part of the IMF jargon, too, the Government will get that concession. Even the IMF has learned some lessons along the way.
As a country, we will have to adopt VMBS's exemplary 'One Less' campaign. People have to cut back. The working and middle classes will be particularly hard hit. The poorest and most vulnerable will have some social safety net provisions. But the vast majority of working-class people and people in the lower and middle classes will have their living standards savaged. How they will react to the increased taxation and cost-of-living increases will determine what kind of social and industrial climate we will have this year.
The storm clouds are thickening. The showers are coming - no pun intended, for, believe me, no shower party can save us from the bitter medicine we all have to take. Let's stop believing in fantasies. While we continue to clamour for more IMF details and timelines, and while the Government panders to this with press briefings and speeches, we can safely bank on more hardships, more belt-tightening, more cutbacks and more price increases on less income, as our new normal.