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STAY THE COURSE! - Economist urges Government to reject call for IMF to relax the noose

Published:Friday | July 17, 2015 | 12:00 AMRyon Jones
Dr Damien King

While many Jamaicans have reacted favourably to news that five members of the United States Congress have written to President Barack Obama urging him to nudge the International Monetary Fund (IMF) to relax the terms of its agreement with Jamaica, one of country's leading economists is pressing the Portia Simpson Miller-led administration to reject this move.Dr Damien King is warning that even if the IMF plays ball, the administration should steer clear of taking up the opportunity."If Obama and the Congress and the IMF and the Pope andthe Archbishop of Canterbury give us permission to spend more than we are earning and to start borrowing again, why is that something we would choose to do?" questioned King, who heads the Department of Economics at the University of the West Indies, Mona.One of the appeals made by the five members of US Congress who signed the letter to Obama is for the IMF and the multilateral development banks to urgently consider extending the maturity dates of Jamaica's current loans.But King does not see the rationale behind this request."The loans we currently have with them are already very soft loans; they already have long repayments and low rates of interest. That is why we borrowed their money, because it is money on very soft terms," said King."Softening the terms does not allow us to escape the arithmetic of what you don't pay from the tax revenue, you have to borrow and pay back in the future with interest. If Congress wants our terms to be softened, tell them to give us some money. We don't need their permission to borrow money."LOOKING OUT FOR JA'S INTERESTAccording to King, softening the terms would only result in Jamaica running up its deficit and starting to borrow again, as the country does not have the tax revenue to cover government expenditure, including debt servicing."The reason why we have a balanced budget and a primary surplus of 7.5 per cent and seek the IMF validation that we are doing what we say we are doing is because it is in Jamaica's interest to do so," said King."We went to the IMF because we decided that the debt was unsustainable. So we don't need to seek the IMF's permission to have bad economic policy. So I actually don't understand why is it that Congress letter is of any significance. We already have the option of telling the IMF to go and play with their thumb."The economist argued that if Jamaicans want evidence that the decision to accept the current IMF terms and conditions was the right one, they need look no further than Greece."Inflation is falling, the debt is falling, interest rates are falling, people are literally lining up to lend Jamaica money, whereas nobody is lending to Greece, and two years ago nobody was lending to Jamaica," said King.He argued that the developments in Greece are the best thing that could have happened to show the Jamaican electorate what happens when economic reforms and fiscal consolidation are