Friday, January 04, 2013

Jamaica without the IMF

AS I read the December 29, 2012 statement, issued by the finance minister re the status of the IMF negotiations, I thought to myself that it is not clear when Jamaica is to expect an IMF agreement. I say this because both the minister's statement and the one issued by the IMF are unclear about a timeline. In fact, the timing seems to be dependent on the achievement of certain prior actions. I am not sure what the prior actions are, but certainly one thing came to the fore. The fact that "...the examination of even higher primary surpluses in the medium term to underpin targets for debt reduction" was mentioned, means to me further expenditure cuts.

If you look at the fiscal accounts to November 2012, it shows that the fiscal deficit is off target by approximately $2 billion, but deeper examination shows that this is as a result of expenditure coming in $8 billion less than projected, and revenues underperforming by $10 billion. So we have sought to maintain the fiscal deficit target by reducing expenditure which, in my view, means further weakness in the economy.

We must have an alternate plan for Jamaica without the IMF. (Photo: AFP)

If one examines the recent history of the IMF programme, and in particular Greece, you will see that the emphasis is on debt reduction via reduced fiscal expenditures. In my view, this will not have any significant benefit for Greece. In fact, it is the primary cause of the social disruptions and the hardships they face. In short, the IMF cannot point to any success under that approach. Moreover, we see where even Germany is beginning to feel the effects of the weakening euro economy. Any recovery in global markets will be buoyed by the US, and to a lesser extent China, and both economies have gone the path of fiscal stimulus.

I say all of this to bring the reality home that if it is that the IMF insists on drastic spending cuts, such as reducing the public sector or cutting back on capital expenditure, then I would expect that the government in its wisdom must resist. We have already seen what the 2010 IMF programme has amounted to, and to continue on a path that has proven not to work can be defined as nothing else but madness.

We therefore need to support the minister in his resistance to any such measure and must face the reality that we must have an alternate plan for Jamaica without the IMF.

But what does this mean for us?

In order to answer that we have to look at what the main challenges faced by the country are and mitigate the risks of not having an IMF agreement in place. The major risks of not having an agreement in place are (1) finding approximately US$250 million for debt payment; (2) funding the budget shortfall because revenues are underperforming and (3) eliminating the foreign currency shortfall.

An IMF agreement would deal with these three main issues. However, if the prior action for the agreement is that we must lay off significant number of public sector workers, increase taxes, and/or reduce further capital expenditure, then we will find ourselves back in the current situation shortly; particularly if we fail to take the fiscal policy decisions that are necessary for economic development, with or without the IMF.

There are, of course, some realities that we have to face and some actions that we need to take if we are going to achieve the economic development that has eluded us since the 1960s. What is required to take these decisions is more political will than anything else.

Let us assume that we have the political will, and also there is no IMF agreement. How can we then mitigate the risks mentioned above and at the same time see a path to economic development.

The first thing we need to do is ensure that we have adequate foreign currency in the system to pay the maturing debt and also to satisfy the demand for production and consumption. Addressing first the debt maturity, I am sure that we can find a way to pay the maturity as it arises. It is just a matter of cost of funds. I am sure that ministry officials must already be doing their homework.

The way for us to satisfy the foreign currency shortage is in my view to immediately address the thorn of energy and food costs. These amount to 45 per cent of imports and can significantly reduce the foreign currency deficit if addressed decisively and radically through fiscal policy. I have discussed a lot in the past and so will not go into any details. However, an example is when I pointed to the need to not remove the GCT on electricity but rather set up a fund where "tax-compliant" persons would be given a credit from that fund if they were to set up renewable energy at home. If we had taken that approach we would have today seen a reduction in oil imports. The will needs to be there first, and Jamaicans must start making demands based on future benefits and not only immediate ones.

The other problem which will remain is how to deal with the need for funds to finance the fiscal expenditure. The solution is certainly not to cut the public sector but rather to address the issues of bureaucracy and law and order.

Again, I have spoken to about three issues repeatedly -- energy, bureaucracy, and law and order. Therefore, I will not go into details, but suffice to say these three will add over $100 billion to the economy, if the proper fiscal policy initiatives are taken in a decisive manner.

Because we have not addressed these matters before however, the solution is not going to give us the immediate result we need for this year's fiscal accounts. However, if we start addressing these now, then in six months I think we can start seeing results.

This will happen, however, only if we start and act decisively, or else the only option may well be the very bitter medicine of the IMF.

43 comments:

Anonymous said...

Have you ever thought about creating an ebook or guest authoring on other sites?
I have a blog based upon on the same information you discuss and would
really like to have you share some stories/information.
I know my audience would appreciate your
work. If you are even remotely interested, feel free to send
me an e-mail.

Also visit my homepage; diet that works

Anonymous said...

What's up to every body, it's my first pay a quick visit of
this web site; this blog consists of remarkable and in fact excellent material
designed for visitors.

Feel free to surf to my web-site - calculate bmr

Anonymous said...

Informative article, exactly what I wanted to find.

my website ... diet plans that work

Anonymous said...

Hello mates, how is everything, and what you want to say on
the topic of this piece of writing, in my view its actually awesome in favor of me.



Also visit my web blog: best diet

Anonymous said...

Hello to all, how is the whole thing, I think every one is getting
more from this web site, and your views are fastidious for new viewers.


my web blog waist to height ratio calculator

Anonymous said...

This text is invaluable. When can I find out more?

my web blog waist to hip ratio calculator

Anonymous said...

of course like your website but you need to take a look
at the spelling on quite a few of your posts. A number of them are rife with spelling problems and I to find it very troublesome to inform the reality then again
I'll definitely come back again.

My blog post :: airplane games simulator

Anonymous said...

I'm not sure exactly why but this website is loading extremely slow for me. Is anyone else having this issue or is it a problem on my end? I'll
check back later and see if the problem still exists.

Here is my page :: diet plans to lose weight

Anonymous said...

Hey! I'm at work surfing around your blog from my new iphone! Just wanted to say I love reading your blog and look forward to all your posts! Keep up the superb work!

Feel free to visit my blog best registry cleaner for windows 7

Anonymous said...

Can I simply say what a relief to discover somebody who genuinely knows what they're discussing over the internet. You definitely understand how to bring a problem to light and make it important. More people have to check this out and understand this side of your story. I can't believe
you're not more popular given that you certainly have the gift.

my web site - Www.Cheryl-Ann.Com

Anonymous said...

Do you mind if I quote a couple of your posts as long as I provide
credit and sources back to your blog? My blog site is in the very same niche
as yours and my users would truly benefit from some of the information you provide here.

Please let me know if this ok with you. Cheers!


My blog post ... Order Razberri Ketone Slims

Anonymous said...

Appreciate the recommendation. Let me try it out.

My blog :: Diets That Work Fast

Anonymous said...

Have you ever considered about adding a little bit more than just your articles?
I mean, what you say is valuable and everything. But just imagine if you added
some great pictures or videos to give your posts more, "pop"!
Your content is excellent but with images and clips, this website could definitely be one of the best in its
niche. Amazing blog!

My web blog: diets that work for women

Anonymous said...

Hello there! This is my first comment here so I just wanted to give
a quick shout out and say I really enjoy reading your posts.

Can you suggest any other blogs/websites/forums that go over the same topics?
Thanks!

my web site safe diet plans

Anonymous said...

I was able to find good info from your content.

Feel free to visit my webpage ... diet Plan For women

Anonymous said...

If some one desires expert view concerning blogging afterward i suggest him/her to pay a quick visit this website, Keep up the fastidious work.


My page; plane games

Anonymous said...

I think the admin of this website is truly working hard for his web site, as
here every data is quality based stuff.

Feel free to surf to my blog post :: graduate certificates

Anonymous said...

Does your site have a contact page? I'm having trouble locating it but, I'd like to send
you an email. I've got some creative ideas for your blog you might be interested in hearing. Either way, great website and I look forward to seeing it develop over time.

Also visit my web page; bmi calculator

Anonymous said...

Hey! Someone in my Myspace group shared this site with us so I came to give it a look.

I'm definitely loving the information. I'm book-marking and will be tweeting this to my followers!
Excellent blog and outstanding style and design.

My website hip to waist ratio

Anonymous said...

Hey! Someone in my Myspace group shared this site with
us so I came to give it a look. I'm definitely loving the information. I'm book-marking and will be tweeting this to my
followers! Excellent blog and outstanding style and design.


My web-site: hip to waist ratio

Anonymous said...

I enjoy what you guys are up too. This type of
clever work and reporting! Keep up the good works guys I've incorporated you guys to my personal blogroll.

My homepage; raspberry ketone diet

Anonymous said...

I constantly spent my half an hour to read this web site's content all the time along with a cup of coffee.

Also visit my web blog: fastest way to lose weight

Anonymous said...

Greetings from Los angeles! I'm bored to death at work so I decided to browse your site on my iphone during lunch break. I love the info you present here and can't wait to take
a look when I get home. I'm surprised at how quick your blog loaded on my mobile .. I'm not
even using WIFI, just 3G .. Anyhow, good site!


my webpage - bmi chart male

Anonymous said...

Hi, i think that i saw you visited my site thus i came to “return the favor”.
I am attempting to find things to enhance my website!I suppose its ok to use a few of your ideas!
!

Feel free to visit my web page waist height ratio

Anonymous said...

Hi there, I discovered your web site by means of Google at the same
time as looking for a related subject, your website got here up, it seems to be great.
I've bookmarked it in my google bookmarks.
Hello there, just was alert to your blog via Google, and found that it's really informative.
I'm gonna be careful for brussels. I'll be grateful should
you proceed this in future. Lots of folks will likely be benefited from your writing.
Cheers!

my web page :: healthy diet plan

Anonymous said...

Hey There. I discovered your blog the usage of msn. That is a
very smartly written article. I will make sure to bookmark
it and come back to read more of your useful information.
Thank you for the post. I will definitely comeback.

Take a look at my website diets that work

Anonymous said...

Simply desire to say your article is as astounding. The
clarity in your post is simply excellent and i can assume
you are an expert on this subject. Fine with your permission let me to grab
your feed to keep updated with forthcoming post.
Thanks a million and please keep up the enjoyable work.


Also visit my homepage ... http://onlinehomecareerssite.com

Anonymous said...

I think this is among the most vital info for me.
And i am glad reading your article. But should remark on few general things, The website style is wonderful, the articles is really excellent :
D. Good job, cheers

Also visit my blog post: airplane simulator

Anonymous said...

We stumbled over here from a different web address and thought I should
check things out. I like what I see so now i am following you.
Look forward to looking over your web page repeatedly.


my website - metabolic rate calculator

Anonymous said...

I'm now not certain the place you are getting your info, however great topic. I needs to spend some time finding out more or figuring out more. Thanks for great info I was looking for this info for my mission.

Here is my web page http://purecleanse.info

Anonymous said...

Hurrah, that's what I was searching for, what a stuff! present here at this website, thanks admin of this site.

Here is my page :: Bmi Calculations

Anonymous said...

I all the time used to study piece of writing in news papers but now as I am
a user of internet so from now I am using net for articles, thanks to web.


Feel free to visit my site: Diet Green Coffee

Anonymous said...

Normally I don't read post on blogs, but I would like to say that this write-up very pressured me to take a look at and do so! Your writing taste has been surprised me. Thank you, very nice post.

Also visit my web-site - crash diets that work

Anonymous said...

Excellent article. I will be dealing with some of these issues
as well..

Look into my site; ways to lose weight fast

Anonymous said...

Appreciating the time and effort you put
into your blog and in depth information you provide. It's great to come across a blog every once in a while that isn't the same
unwanted rehashed material. Wonderful read! I've bookmarked your site and I'm including your RSS feeds to
my Google account.

Also visit my web blog: raspberry ketone reviews

Anonymous said...

Hey just wanted to give you a quick heads up. The words in your content seem to be running off the screen in Ie.
I'm not sure if this is a format issue or something to do with web browser compatibility but I thought I'd post to let you know.
The style and design look great though! Hope you get the problem fixed soon.
Kudos

Take a look at my page Recommended Browsing

Anonymous said...

Hello to every one, because I am in fact keen of
reading this webpage's post to be updated on a regular basis. It contains fastidious information.

Also visit my webpage; Pure GCE Diet

Anonymous said...

We absolutely love your blog and find nearly all of your post's to be exactly what I'm looking for.

Would you offer guest writers to write content for you?
I wouldn't mind creating a post or elaborating on a few of the subjects you write about here. Again, awesome website!

my website; best diet plan

Anonymous said...

I loved as much as you'll receive carried out right here. The sketch is attractive, your authored material stylish. nonetheless, you command get bought an impatience over that you wish be delivering the following. unwell unquestionably come more formerly again as exactly the same nearly very often inside case you shield this increase.

Also visit my homepage; waist to height ratio calculator

Anonymous said...

Can I submit your publish to my weblog? I will add
a back-link to your forum. That’s one really candy post.


Have a look at my web-site; having trouble getting pregnant with second baby

Anonymous said...

Thanks very nice blog!

Here is my page; http://demo.trrackedaddons.com/index.php?do=/blog/34663/why-folks-however-buy-porn-site-memberships/

Anonymous said...

naturally like your web-site but you need to test the spelling on several of your posts.

Many of them are rife with spelling problems and I in finding it
very bothersome to tell the truth however I'll definitely come again again.

Look at my web-site - pornharvest.com/index.php?m=2494160

5689 said...

zzzzz2018.8.4
coach outlet
vibram fivefingers
maillot football pas cher
off white clothing brand
coach outlet
nike blazer
manolo blahnik
nike shoes
super dry
ugg boots