TRAPPED! IMF rep says without key policy changes, Jamaica will remain in economic rut

Livern Barrett, Staff Reporter

ThE International Monetary Fund's (IMF) outgoing senior resident representative in Jamaica, Dr Gene Leon, has warned that whether the country can claw its way from under the mountain of debt it now faces will depend on the policies that are put in place.

Leon, who was speaking at a Gleaner Editors' Forum at the newspaper's central Kingston offices yesterday, said "wishing away" the debt stock was not an option, as that would still not solve the problem.

"Supposing tomorrow God would give us a wish and that one wish was to get rid of the entire Jamaica debt, [so] you wake up tomorrow morning and you have zero debt," he said, as he sought to illustrate his point. "What guarantee would you have that in five years' time, in 10 years' time, the debt is not exactly back where it was? Ultimately, it is the policies that you are going to put in place," he asserted.

Head of the Department of Economics at the University of the West Indies, Dr Damien King, agreed, calling Leon's assertion "a fundamental point".

"The issue is not so much the elements of the $70-billion adjustment programme," King said in reference to the Budget deficit.

"The real issue [lies with] the mechanisms of fiscal governance that got us into this position and have kept us in this position. And if you want to understand many parts of this programme, you have to recognise that," he argued.

NO EASY WAY OUT

"So, if we are going to sit here and try to think up some easy get-out of this deep hole, … it doesn't exist," King continued.

Seeking to put the IMF deal into perspective, Leon, who demits office at the end of next month, pointed out that Jamaica is now faced with a 150 per cent debt-to-GDP ratio, as well as accumulated net indebtedness to other nations of about 125 per cent, or one and a quarter times what is produced annually.

According to him, this is compounded by 40 years of less than one per cent economic growth, caused by low productivity, lack of competitiveness, rising energy costs, and inhibiting bureaucracy.

"You are starting from that position … . Your creditors and lenders of first resort are not comfortable in wanting to extend more financing to you," Leon reasoned.

"That initial position says you have to do something about it because, going forward, you are not sustainable," he argued.

However, rather than question how realistic the programme is, Leon suggested that Jamaica examines its resolve to meet the target agreed to in the standby deal.

"Your initial conditions do not literally give you the option of thinking that you have the liberty to pick and choose," he cautioned.

"I would prefer to say, 'How much resolve do I have? How much do I need to get everyone together to allow me to get to where I need to go?'" he said.

"I would prefer to think of it as what we need to do to make it 'doable' because the alternative is not contemplatable," he concluded.