 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
|
 |
|
|
 |
 |
|
|
|
|
| |
Commentary>Admit it! There's no alternative to the IMFR Anne Shirley - Business Writer |
 |
The sooner that the Government levels bluntly with the nation that there is no credible alternative available at this time to Jamaica's returning to a borrowing arrangement with the International Monetary Fund (IMF), the sooner we will be able to put this arrangement in place.
The comments by the prime minister in the House of Representatives on Tuesday in response to questions posed by Ronald Thwaites (PNP-Central Kingston), gave some indication of the severity of the balance of payments/foreign exchange gap that the country now faces, but did not go far enough.
The bottom line is that the foreign exchange earnings gap created by the fallout in the major export sectors particularly bauxite/alumina sector, the rapid reduction in remittances, the heavy discounting in the tourism sector, and the protracted pace of the divestment negotiations re Air Jamaica and the Sugar Company of Jamaica cannot be closed without accessing external funding over the next three years in the region of US$1.5 billion to US$2.5 billion.
The gap on the balance of payments side for this fiscal year, given rising oil and other commodity prices will quite likely be in the order of US$800 million at best for this year alone.
And indications are that the IMF is reluctant to lend us more than US$1.2 billion over the next three years - this is 300 per cent of our current IMF quota, and would increase the public debt position by around a further 10 per cent.
No amount of sugar-coating is going to change the facts.
And there are no immediate alternative sources of additional foreign exchange generating income by other sectors of the economy that can make up that forex gap in the next two-three years.
Most activities are going to need some lead time for planning and actual execution.
Therefore, the seeming willingness to write-off the bauxite/alumina industry and the participation of UC Rusal in Jamaica is perhaps premature.
There is need for an aggressive engagement of the Russian aluminum giant and its Nordic partners in seeking to jump-start the cost efficiency programmes at Alpart and Windalco plants respectively.
We need bauxite/alumina for the short-medium term as we try to find other sources of f/x earnings.
Similarly, the re-engagement of the Venezuelan Government investment in the expansion of the Petrojam refinery should be at the top of the Government's investment agenda, as well as the development of one or more mega projects around the Port of Kingston/Fort Augusta/Portmore and the toll-road corridor.
We cannot expect Hugo Chavez to keep bailing us out indefinitely.
Let us not reinvent the wheel, but dust off some of the projects/proposals of Edward Seaga and the millennium projects of PJ Patterson that are sitting on the shelf.
The first quarter of the current financial year is almost at an end, and the Parliament (and the nation) are yet to receive a copy of the medium-term financial targets and framework for the period FY 2009-2010 to FY 2011-2012 on which the Government of Jamaica will be basing its proposed country programme in order to access an extended standby agreement with the IMF.
No Mystique
There is no mystique in the process of accessing funding from the IMF, and there is no real need to receive extended lead time for assistance/information from the Fund on how to access its various facilities.
For the past 20-30 years, as a regular part of the annual IMF Article IV Consultations, there has been a medium-term framework built into the process that is presented by the GOJ and agreed on by the Fund.
This forms a major part of the discussions and the presentation of the Government's action plan, including its borrowing requirements going forward.
The other multilaterals and the international capital markets use the Article IV Consultation document as a guide to the programme of the Government and the way forward.
In fact the IMF basically had to give its seal of approval before the IBD and CDB made the recent policy-based and other loans to Jamaica.
In other words, Jamaica already has an ongoing relationship with the IMF.
However, the IMF is not going to develop a dedicated programme for the Government of Jamaica.
The Fund has learned its lesson.
Fund Use
The Jamaican authorities have to come up with their own programme which will indicate to the IMF what they propose to do with the money, what they want to borrow from the Fund, and how to repay the loan.
In this process, the GOJ will have to state how it intends to close Jamaica's balance of payments problem over time, how it will reduce the fiscal deficit and how it will reduce the public debt.
To give the Bank of Jamaica its due, the indications are that in terms of monetary policy there are no real outstanding issues between the central bank team and the IMF technocrats.
Rather, the Ministry of Finance technocrats need to urgently prepare the GOJ's new fiscal policy and financial programme given the current fallout in our export earning sectors.
In addition, the Government has compounded the problem by its unilateral breaking of the current public sector MOU.
The trust lost is a critical aspect of the overall governance process that needs to be healed - the matter cannot be brushed under the carpet.
The sooner that the Ministry of Finance and the Cabinet deal with these matters, the sooner we can have an IMF agreement, and the greater confidence there will be within the capital markets and the country that Jamaica can make it through the next few years.
The current tentative approach to discussions with the Fund and private conversations with members of the financial sector towards debt restructuring will not engender confidence going forward into the forex drought months this summer.
renee.shirley@yahoo.com