EDITORIAL - Ms Lagarde's important warning

In the conjured din over exchange-rate policy, an important warning to Jamaica by the International Monetary Fund's (IMF) boss, Christine Lagarde, appears to have been largely unnoticed. Maybe it's because it was contained in a single, simple sentence.

"Don't let the electoral process get in the way of the efforts you are undertaking," she said in her remarks to the luncheon with private-sector leaders last Friday, during her visit to the island.

Hopefully, it was a thought Ms Lagarde shared with Prime Minister Portia Simpson Miller during their private meeting that morning and had an opportunity to suggest to Andrew Holness in their separate session, presuming he was not overly consumed by other issues. For it is an idea that all the political contenders, but particularly those who form the Government, should be especially mindful of.

In the past two and a half years since Mrs Simpson Miller's People's National Party (PNP) returned to Government, Jamaica has been undergoing a painful economic adjustment. We observed more than J$45 billion in new taxes; we have foregone some of the agreed interest on government bonds, which will take longer to recoup; and, among other things, witnessed a 30 per cent depreciation in the value of our currency.

We have had to absorb this pain not because somebody somewhere doesn't like Jamaicans. They are required because for more than four decades, we terribly mismanaged our economy, exemplified by annual growth over that period of a meagre one per cent and a government debt that was approximately one and a half times the value of all the goods and services produced in Jamaica.

We would find it difficult to pay our bills, and few creditors would lend unless they got nearly the whole hock, rather than a pound of flesh. Like a junkie who had gone rock bottom, the way back was not going to be easy.

Jamaica is making strides

But over the past year, under the agreement with the IMF, Jamaica is making strides. We are beginning to balance the national Budget; a strong primary surplus is helping to reverse the debt trajectory, the current account deficit is improving; the reserves have increased, and there are signs of economic growth.

But Jamaica is far from having recovered. There is much more work to be done to create a competitive economy capable of sustained growth. Much of it will be painful. Which is where Ms Lagarde's advice is relevant.

Mrs Simpson Miller's Government is halfway through its life, and her party will have begun to look towards the next general election. It will be tempting to compromise on the reforms in a search for political palliatives that might guarantee a retention of office.

It is also typical of the history of Jamaican opposition parties to proffer supposedly painless alternatives for fixing the economy. Maintaining an overvalued currency or a fixed exchange rate may be on the policy menu, but absent the explanations of how this option may mean a depletion of the reserves and/or increased borrowing; or how an overvalued currency supports imports and, thereby, external producers; or that exchange-rate depreciation, supported by other things, enhances export competitiveness and import substitution.

It is this ascendancy of politics over economics that has perpetuated our poverty and against which Ms Lagarde warned, which Jamaicans should heed.

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.