Editorial | A staff monitoring with IMF may be necessary
This newspaper notes with satisfaction last week’s disclosure by the International Monetary Fund’s (IMF) resident representative, Dr Constant Lonkeng Ngouana, that the Fund will maintain its Kingston office for another two years after its US$1.6-billion Standby agreement (SBA) ends in November.
Rather than monitoring the economic programme that underpins the SBA, the office’s new emphasis will be on providing technical support for capacity building, including, Dr Lonkeng Ngouna said, towards the establishment of an independent fiscal council. The latter point is important.
Jamaica has been the IMF’s most credible poster child of the past decade. It can’t take full credit for Greece, which is emerging from its bailout and has begun to show the early shoots of growth. The Europeans were at the forefront of that project. And we don’t know how Argentina, whose collapse was staved off, will turn out. In our region, Barbados’ programme is only getting into gear, and the economies of St Kitts and Nevis and Grenada are too small to provide the Fund with more than the merest blip on its global radar.
With regard to Jamaica, though, the past seven-plus years, starting with the 2012 “prior conditions” tax package of J$19.4 billion, through to the following year’s US$938-million Extended Fund Facility (EFF) and the existing SBA, can be interpreted as a success story for the IMF.
Jamaica, without social unrest, has maintained a primary surplus of upwards of seven per cent of gross domestic product (GDP). It has reduced its debt from over 140 per cent to 96 per cent of GDP, while growth, at around two per cent, is promising after limping along for 40 years at an average of one per cent. Unemployment, at 7.8 per cent in April, is at its lowest in decades.
A critical contributor to this success was the consensus that emerged around the need for economic reform and the ownership that Jamaica took of the programme, which included monitoring its performance to ensure agreed outcomes, or as close to them as possible. And a crucial aspect of the monitoring matrix was the private-sector-civil-society-led Economic Programme Oversight Committee (EPOC), which regularly reviewed, and reported on, performance data. It held the Government to account. It is little wonder, in the circumstances, and in the context of Jamaica’s performance under the programmes, that Christine Lagarde, the IMF’s outgoing managing director, twice visited Jamaica and both times hailed the work of EPOC, which Dr Lonkeng Ngouna last week suggested should be copyrighted but which, we suspect, is a legally doubtful prospect. We, nonetheless, get what he means.
EPOC likely to die
EPOC, however, is likely to die with the SBA. Nigel Clarke, the finance minister, has promised an independent fiscal council as its successor – not to provide oversight to an IMF agreement, of which there will be none, but of Government’s economic policies and their implications. Various models exist around the world of such councils, but generally, they are intended to be technically equipped independent arbiters even though they may be funded by governments.
Jamaica has talked about its own for a year, but has yet to produce legislation for its establishment or a blueprint for its operation. Even though we trust Minister Clarke and have faith in its intention, it is not unreasonable to doubt, as some people do, that a fiscal council will be in place before the next general election. Our suggestion, therefore, is that Jamaica, in November, at the end of the SBA, enter a staff-monitoring agreement with the IMF, as happened in 1995 when it completed an EFF.
This would ensure a level of external oversight of the economy in the hiatus between the dissolution of EPOC, if the private sector decides to no longer fund that group, and the creation of the fiscal council, with a broader mandate. It’s one way, through the IMF’s quarterly review statements, to promote transparency and help keep Government fiscally honest and accountable.