Mon | Sep 27, 2021

Bitter medicine too strong

Published:Friday | July 17, 2015 | 10:47 AM


In a letter dated July 14, 2015, five United States congressional members wrote to President Barack Obama asking that he urge the International Monetary Fund (IMF) "to provide the [Jamaican] Government the fiscal space it desperately needs to boost growth and address continued high unemployment and poverty". This follows Obama's visit in June when he stressed that economic growth was the best way forward in reducing Jamaica's debt burden.

The letter states that "Jamaica now has the world's most austere national budget - with a 7.5% primary surplus last year and for at least the next three years as part of the current IMF programme. Its interest burden is among the world's highest (8% of GDP) and interest payments to multilateral financial institutions surpassed multilateral loan disbursements in 2012 and 2013.

"Last year, Jamaica paid $136 million more to the IMF than it received from it ... . We believe the IMF should lower Jamaica's budget surplus [since] the extreme fiscal austerity imposed has proven counterproductive."

These are the same congressional members who worked closely with IMF Managing Director Christine Lagarde, Finance Minister Peter Phillips and Brian Wynter (Bank of Jamaica) to try to find a way forward, resulting in the current 2013 IMF agreement. The programme is clearly not achieving the desired results.

A similar letter was sent by US congressional members to the IMF on July 2, concerning both Jamaica and Greece. With respect to Greece, that letter noted that "Greece has already reduced its national public-sector workforce by 19 per cent and carried out many of the reforms demanded by the IMF and its creditors. It has gone through an enormous fiscal adjustment ... At the same time, as even the IMF has acknowledged in its own research, the austerity imposed by Greece's creditors over the past five years turned out to be far more devastating to the economy than they had predicted."

Thus the debate about the possible outcomes of the current IMF programme must remain alive, and open. It is a pity that Ralston Hyman, once respected for his independence, has now become a mouthpiece for the Government in trying to rubbish WIGUT's suggestion, in line with the above, to reduce (not eliminate) Jamaica's primary surplus from 7.5% to 5.5%. Damien King, and the Gleaner editors, appear to share the same view.

But there surely comes a point when medicine, especially with unpredictable outcomes, can be too strong. Greg Christie and Kavan Gayle are not necessarily incorrect in their assessment that there is too much emphasis on satisfying creditors. The creditors may suffer in the end when the squeeze cannot become any stronger. Greece's story is far from over, and Jamaica's, too.


Kingston 7