I understand the financial strategy of the Government in three parts. The first part started in December 2008. It involved accessing money from the multilaterals that was used as a stimulus package. The second part was the presentation of the Budget in Parliament, that is, the expenditure and revenue plans. The third part was to explore borrowing relations with the International Monetary Fund, which is where we are now.

The managing director of the IMF was here in Jamaica during December last, so I presume a strategy was being conceived of from then. That visit might or might not have been initiated by the Government. The private sector might have done it to force the Government's hand since it had been in denial about a crisis. In other words, the three-part strategy might not have been one well- thought-out strategy. It might have just evolved into those three parts.

So here we are in Act 2, the Government's second year, having talks with the IMF as the third part of addressing the financial mess. We do not have sufficient information about the first part - the stimulus package - and whether it is working or not and Shaw did not speak to this at all. It is strange that after $4.6 billion was spent up to March, the Government has not reported on the results. We must do more to track this programme as it proceeds.

The country is now debating the second part of the strategy - the Budget. This is a debate made difficult by the vagueness of Shaw's presentation, the incompleteness of the tax package, the IMF factor and how this might change the Budget, and the two GCT lists in circulation last Monday, some say deli-berately to deceive and confuse.

Even while all this is going on, we are into the third part of the plot. The country has begun wondering whether the IMF we are talking to is the same IMF of notoriety with a reputation for imposing conditionalities upon countries, leaving them worse off. We hear from others that the IMF is not the same, that it too has learned from past failures and has softened its positions, and that therefore going to the IMF might not be as bad as it was before.

DEBATING ABOUT THE IMF

Dominique Strauss-Kahn, managing director of the International Monetary Fund, is greeted by Audley Shaw, minister of finance and the public service, during a courtesy call at Shaw's National Heroes Circle offices in Kingston, December 9, 2008. - Ricardo Makyn/Staff Photographer

We are not the only ones wondering. An institution in Washington that does policy analysis, the Center for Economic and Policy Research (CEPR), said on April 21, "The IMF was still prescribing inappropriate policies that could unnecessarily worsen economic downturns in a number of countries." This is bad news if we have no choice but to go to the IMF.

The Council of Hemispheric Affairs (COHA), also based in Washington, says it is too early to say whether the IMF has changed or not. This is really not good news either because we don't have enough time to say if the IMF's new facilities are benign. This is supposed to be the reason for the more optimistic view of the IMF. Since March, the organisation has offered new facilities such as the Flexible Credit Line (FCL) and the High Access Precautionary Stand-By Facility without the conditionalities of the kind that made the IMF an oppressive organisation. But then again, the IMF has admitted that it has now abandoned the Short-Term Liquidity Facility because it was not well conceived for the present crisis and had failed. Will the newer facilities fare any better?

At the end of the day, we don't know enough about how our stimulus package is working, what the Budget is about and whether the IMF will be good for us or not. One thing we do know is that the three-part strategy is not the way out of our crisis. It represents borrowing and tax options. But we cannot borrow our way out of our problems. Nor can we tax our way out. We have now maxed out these options. Our tax package is a record high and our borrowings are also a record. We will have to pursue other options.

PRODUCING OUR WAY OUT

We can only produce our way out. But the strategy is not so straightforward. The kinds of taxes we levy and the terms we agree to in order to get loans might undermine the conditions for production.

This brings us back to the debate over the IMF and the multilateral institutions. Critics point out that they encourage the developed countries to have real stimulus packages by lowering interest rates, nationalising failed and bankrupt companies, protecting their industries and subsidising them. These are the opposite of what the IMF prescribed for developing countries in the past.

Critics of the IMF say its approach to developing countries remains different to that to deve-loped ones. To qualify for its loans, governments are required to impose wage freezes, high interest rates, high taxes and to liberalise their trade. The CEPR says "fiscal (budget) tightening, interest rate increases, wage freezes for public employees, and other measures that will reduce aggregate demand or prevent economic stimulus packages in the current downturn" are typical of the stimulus policies of recipients of multilateral funds.

It sounds as though our government has already adopted an IMF-like Budget. It seems, therefore, as though the three-part strategy might be contradictory and self-defeating. The stimulus money borrowed from the IDB (in December) did not stimulate the economy because of the de-stimulating effects of the Budget taxes and tight fiscal measures that are taken in preparation for negotiating IMF loans.

A STRATEGY FOR PRODUCTION

The answer, as I said before, is production. We must have a strategy for production that is supported by our system of taxation, which is designed to provide the appropriate incentives and disincentives towards which the loans will go to develop the industries that would support production.

Take industries that could develop alternative energy. They would make us energy independent, economically competitive as a result of cheaper alternative energy, and help to save the planet at the same time. Rather than simply taxing fuel, we should be using that revenue to develop alternative energy industries. Ethanol, biodiesel, and solar industries are here and represent the future of energy. The same principle applies to all the other areas of productivity that we need to improve performance in. Alternative energy and ICT can make small business and agriculture more competitive. Yet, there is no production plan linked to the tax or stimulus package.

SUSTAINABLE LIVING

Rather than making life harder, tax and borrowing strategies can make life easier by promoting sustainable living. They can provide incentives and rewards for energy-efficient houses, farms, hotels, factories, consumer products and personal lifestyles.

If the IMF's new facilities do provide more autonomy for borrowers to design their recovery programmes, then the onus for a production strategy falls on our government. In the first 19 months of the Government's term, we have not seen any production strategy. Much time has been wasted. In the remaining time, the Government must start a dialogue towards mobilising the country for production. It can begin by rethinking its unproductive taxes.

Robert Buddan lectures in the Department of Government, UWI, Mona. Email: Robert.Buddan@uwimona.edu.jm or columns@gleanerjm.com.