Hurricanes and IMF-Jamaica relations
Kassim Morrison, Guest Writer
It is the middle of the hurricane season, but it is not well known that the rigorous four-year Extended Fund Facility with the International Monetary Fund (IMF) comes with no provision for external economic shocks such as a natural disaster.
Notwithstanding, the IMF agreement does identify that the Government is committed to strengthening the resilience of the country to natural disasters through climate change adaptation and disaster risk reduction initiatives.
Over the next four years, Jamaica has very little wiggle room for any unfavourable contingencies. Through the life of the programme, Jamaica must achieve a primary surplus that is equal to at least 7.5 per cent of its gross domestic product, starting this year.
Additionally, Jamaica must stabilise its inflation rate to around 8.0 per cent and reduce public debt to 96 per cent by 2020.
As a nation that has been ravaged by the likes of infamous hurricanes Gilbert, Ivan, Dean, Nicole and Sandy, a contingency plan seems a must.
During the last decade alone, Jamaica has experienced hurricane or tropical storm conditions in 2004, three in 2005, 2007, 2008, 2010 and 2012.
According to the Planning Institute of Jamaica, these storms cost Jamaica more than J$113 billion in total before adjustment for inflation.
NO MONEY FOR DISASTERS
It is thought-provoking that after analysis of the IMF agreement and the annual budget for fiscal year 2013/14, there is no evidence of any substantial allocations put in place by the Government for contingency.
Only J$229 million has been allocated to the Office of Disaster Preparedness and Emergency Management.
Each time there is a storm, thousands of people are left homeless; roads and other infrastructure are damaged; crops and livestock are lost; commerce is curtailed; and Jamaica's gross domestic product takes a few steps backwards.
Given that Jamaica has faced hurricane conditions repeatedly over the last decade, it would be prudent management on the part of the Government to include provisions for disaster.
In the case of Hurricane Gilbert of September 1988, the IMF agreed to a 20-month stand-by arrangement for Jamaica exactly one week after its passage.
In the wake of that disaster, the IMF agreed to waive the criteria and tests for March 1989, but resumed testing in June that year.
Although Jamaica had been given a reprieve, the country did not recover to meet the IMF's criteria and, therefore, the 1988 SBA was cancelled at the end of September 1989 for breaching net international reserves targets.
To be fair to the Government, it would be hard to include a provision for a disaster, especially one the size of Hurricane Gilbert.
Hurricane Ivan sets the benchmark for recent hurricanes, costing Jamaica J$35 billion in 2004 from extensive damage to agriculture, housing, mining, electricity, transport, telecommunications and tourism.
Some 36 per cent of the total damage was related to the productive sector, while 27 per cent or J$9.8 billion related to government-owned property.
Hurricane Dean in 2007 cost approximately J$23 billion, of which the productive sector sustained damage worth J$11.5 billion or 50 per cent of the total.
Damage to public roads, water supplies, hospitals and schools which would be the responsibility of the Government amounted to J$4 billion.
As a result, the Government had to seek out a US$10 million loan (J$700m) from the World Bank, which it began to repay in 2012.
Hurricane Nicole in 2010 cost nearly J$18.7 billion, of which J$17 billion was for damage to public roads, bridges, and related infrastructure.
To put Hurricane Nicole in context, the entire budget for the Ministry of Transport, Works and Housing is J$18 billion this fiscal year.