By Robert Hart, Staff ReporterTHE INTERNATIONAL Monetary Fund (IMF) has added its voice to mounting concerns about Jamaica's 'unsustainable' debt crisis in the report on the Article IV Consultations held in February of this year.
The government had blocked the release of the report because of what independent sources said was its concern about a controversial statement it contained. But in the report, the IMF welcomed the Jamaica Government's recognition of the need for stronger fiscal adjustment and its commitment to achieve fiscal balance by 2005/06.
NO SCOPE FOR SLIPPAGE
Dated May 23, the staff report, which has been released by Dr. Omar Davies, Minister of Finance and Planning, highlighted findings of the IMF team during its February visit and prior to its controversial visit earlier this month. Its release follows demands by Audley Shaw, JLP spokesman on finance, and many in the financial community, that the contents be revealed.
The report noted that 'there is no scope for slippage as "even successful implementation would leave public-sector debt broadly unchanged at close to 150 per cent" of the country's Gross Domestic Product (GDP).
"The prospects for successful implementation could be enhanced through rigorous expenditure controls including public sector wage restraint, the identification of contingency measures in case current interest rate projections are not realised or other shocks emerge, and the incorporation of fiscal consolidation into legislation," the IMF said in its Staff Appraisal. But in its assessment, the outlook is grim.
"The sustainability of the current situation is in doubt even with determined implementation of the strongest policies," it stated. The authorities have limited degrees of freedom given the already tight fiscal situation, high and rising public debt levels exacerbated by exchange rate depreciation, a financial system with large holdings of public domestic debt, and impact of high interest rates on the debt burden."
The large and rising primary surpluses required over the medium term could be politically difficult to achieve, it stated. "The staff is working further on possible options that would address the problems arising from the debt burden."
ENHANCED COLLABORATION
It said, "enhanced collaboration with the authorities on these issues is planned over the next few months."
A team from the IMF arrived in Jamaica on December 2 to review the economy, Cordel Braham, director of public relations in the Ministry of Finance and Planning, told The Gleaner at the time. The visit was not to carry out an Article IV consultation, Mr. Braham said.
A week later, Dr. Davies contradicted Mr. Braham, stating that the visit was an Article IV consultation.
The IMF stated in its February report that it was recommending a return to 12-month Article IV consultations.
"Opposition party spokesmen said they were told in meetings with the IMF team in December that they were on a familiarisation trip," said financial analyst Orville Johnson. "The handling of IMF issue does not send the right message."
"An informed public can handle the situation more than one kept in ignorance," said economist Errol Gregory. "The worst thing is for the authorities to hide bad news."
"The bad news is the scorecard from IMF is not good," Mr. Johnson said. "We are painting ourselves in a corner."
There has been progress in the interest rate, inflation rate and the exchange rate, he said. "But there is still a major fiscal problem."
He said it was a positive development that the private sector had made suggestions to address the problem.
Also, the IMF indicated the necessity for the Government to engage in consultations with civil society to determine a comprehensive approach to structural reforms to promote faster growth.
"These reforms include further anti-crime measures, flexible working arrangements and economy-wide agreement to promote wage restraint and productivity growth," the IMF said. The reduction in regulatory barriers to small enterprises and the lowering of agricultural protection are also necessary, the IMF added.
