An official of the International Monetary Fund is  predicting some amount of “pain” for Jamaica’s 2.7 million inhabitants when the Fund completes the process of lending Jamaica money to assist with budgetary obligations.

The official, who spoke with the Observer from his Washington, DC headquarters last week on condition of anonymity, said that although things may be tough, the strings that tied past agreements between Jamaica and the Fund may not be as tight this time.

“There is no doubt that there will be some amount of pain to be felt by the Jamaican people after this agreement is finalised,” the official said. “The standard of living of Jamaicans may be affected during the life of the agreement. However, we can’t say how tough things will be, or even give an indication. We have a duty to protect social spending and we will insist upon that. The objective and goals of the agreement are still being hammered out, so we can’t say what the conditions under which the loan will be granted will be.”

Finance Minister Audley Shaw last week confirmed that Jamaica would be seeking to draw down US$1.2 billion in support from the IMF through its Special Drawing Rights to shore up the 2009-2010 budget which has suffered internal and external battering, due mainly to the effects of the global recession.

A significant drop in revenue from the bauxite and alumina sector; a fall in remittances, the island’s leading earner of foreign exchange; and shortfalls in income tax and general consumption tax collections have led to the Government’s dilemma and added speed to the Bruce Golding administration’s efforts to seek external funding.

The IMF, which was formed in 1944 to help regulate the world’s economies that had been badly affected by the Second World War, has assisted most of its 186-member countries with funding since.

As far as meeting the September deadline for the loan approval, as is hoped by Jamaica, the official said that it was possible, but many things needed to be done.

“It’s realistic, but they [Jamaican Government] still have work to do, as the process takes a while,” he said. “If it was a case of dire emergency, then a loan package could be approved in less than two weeks. But Jamaica is not melting down, that’s not the case, so there is no mad rush. I understand the anxiety, but these negotiations have their own rhythm.

“The IMF looks at the needs of the country at the time  and adds some security measurements. There are some parameters that a country uses to assess its vulnerability. The IMF will look, for example, at a country’s international reserves and determine how many months of imports they represent. Obviously, the more reserves a country has, it would be in a better position,” he said.

“We have not discussed conditionalities yet with the Jamaica Government, because we don’t know for sure what the Government wants,” added the IMF official. “The Government has more work to do, and right now their technical people are hammering out the details. When that is completed, we will outline the conditionalities. At this point we can’t say to the Government that in order to get the loan, you will have to cut back on this programme or that programme.”

Two funding economists and a press officer from the IMF visited Jamaica last week to hold preliminary talks with government officials, in what was described as a low-profile visit.

There was speculation from Prime Minister Golding that among the first casualty under the IMF agreement would be the chopping of the Constituency Development Fund (CDF), a programme under which each member of parliament is allotted $40 million to spend on projects in his/her constituency.

MPs had hailed the CDF, introduced by the Golding administration, as something that is achieving the desired effect of improving the lives of constituents.

Some financial analysts and government officials have been painting a fresher picture of the IMF as an institution that is not as hostile to Third World countries as it was during the 1970s and 1980s when Jamaica borrowed from the Fund.

“The IMF now is far more liberal than it was in the early years. It is more receptive to the needs of its members and it no longer carries a hard-line position on certain things, like privatisation of government entities,” said the IMF official. “Naturally, we believe that private ownership is always the best, but if governments can show why companies under their control should not be privatised, the IMF would not necessarily stick to its position.”

Jamaica joined the IMF on February 21, 1963. The island last borrowed US$77.75 million from the organisation on December 11, 1992 and paid off that loan on March 16, 1996.
Before that, in the 1990s, Jamaica benefited from loans under the Fund’s stand-by arrangements.

The Jamaica Government borrowed US$82 million on March 23, 1990, which was repaid by May 31 the following year. On June 28, 1992, Jamaica received US$43.65 million under the same stand-by arrangement, and completed its repayment on September 30, 1992.

According to the IMF’s mission statement, its job is to promote a stable international monetary system, in which member countries can achieve high rates of employment, low inflation and sustainable economic growth.

In the meantime, Prime Minister Bruce Golding said Cabinet should by next week have the final proposal from the Ministry of Finance for a stand-by loan facility with the IMF.

Speaking at a press briefing at Jamaica House Monday, Golding said the Government has met with the Opposition, as well as various leaders from the private sector, and trade unions, in seeking to build consensus, before signing off on a Letter of Intent for the IMF.

Golding pointed out that any arrangement with the Fund meant that adjustments would have to be made in the economy, in order to ensure that the country received maximum benefit.

Golding said that one advantage of this type of arrangement was that the country could get the support it needed over that period of adjustment. “For example, you can pay for the oil when it arrives at the dock, secondly, it opens the doors of not only other multilateral institutions, but commercial institutions when they are back in business.”

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Antillean · Bridgetown, Barbados

The Antillean is a pan-Caribbean nonprofit media outlet, covering news, features and opinions on social issues in the Caribbean region and the wider Americas. Our mission is to encourage conversation on, and enhance the visibility of, social currencies within the hemisphere – issues which are often underreported in the mainstream media.

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