Jamaica told 'further belt tightening' to come under IMF

KINGSTON, Jamaica, Sunday December 30, 2012 – Despite promises to the nation that the letter of intent between the Government of Jamaica and the International Monetary Fund (IMF) would have been signed by the end of this year, there is still no word on when the agreement will be concluded.

On Saturday, Finance Minister, Dr. Peter Phillips stated that the talks were almost at an end, however it appears that the promised deadline will not be met.

In a five page press release, Phillips stressed that negotiations with the IMF were ongoing and indicated that talks took place with IMF staff as late as Friday.

The government also placed the country on notice that there would have to be further “belt tightening”.

“There are complex and weighty issues at stake which will determine the future prospects of our country,” said Phillips

Last month, Private Sector Organisation of Jamaica (PSOJ) President Christopher Zacca, while expressing confidence that the country will get another agreement with the IMF, complained that the group was in the dark about details of aspects of the negotiations .

In response to concerns expressed by members of the private sector Phillips said, “There is no reason for pessimism – none at all….I think I have communicated more frequently than was done by the Opposition (Jamaica Labour Party) about the state of the negotiations,” asserted Phillips.

“We have, at every point, given information as to what is happening. We have spoken in the Budget Debate, we have given regular updates in the Parliament, and, certainly, we have given more updates in the period of negotiating this programme than was given in the whole period of the collapse which took place in March 2011 … . In that nine months, there was nothing said.”

He noted that the final issues on which the government is now focused include the approach and timetable for a comprehensive policy on tax waivers and incentives, from which it foregoes billions in revenues each year. 

The administration has promised to seek to keep its spending in line with revenues and to grow those revenues further in keeping with its  debt reduction strategy.

It’s also focused on safeguards against fiscal slippage and the examination of even higher primary surpluses in the medium term to underpin targets for debt reduction.

He noted that there will be prior actions before finalization of an IMF deal, subject to the approval of the cabinet and the necessary consultations with local stakeholders.

concerns.

Meanwhile, Financial Analyst, Ralston Hyman said this latest development concerning the deal with the IMF has not come as a surprise.

“Looking at the magnitude of the things that were supposed to be done , looking at the technical tam that the minister had around him , because he basically had the same team that failed in the agreement that was inked by the Jamaica Labour party that broke down after only one quarter. I am not surprised, this will lead to greater uncertainty and a greater decree of lack of confidence that will impact on investment flows, economic growth  and the value of the currency, it also means that there will be no agreement with the IMF before the first quarter of next year as I have always contended and this means that the uncertainty will continue going into that period”

Hyman also noted that the country should prepare for the belt tightening as serious economical challenges are on the horizon for the New Year. He said this will translate into cuts in basic social services and in the public sector.

In 2010 the JLP which was then in Government resumed a borrowing relationship with the IMF but was unable to meet several of the targets under the Stand-by Agreement (SBA) and in July this year, Phillips indicated that the Portia Simpson Miller government intended to renegotiate the US$1.47 billion agreement with the IMF which expired in May. (CMC) Click here to receive free news bulletins via email from Caribbean360. (View sample)