Nurses and other public-sector workers are going to be under even more pressure. - File photos

Last Thursday, Prime Minister Golding met with representatives of the Opposition, the trade unions, and the private sector to discuss the impending agreement with the International Monetary Fund (IMF). Events are moving very rapidly and in another few weeks, our fate will have been sealed unless we act.

Contrary to what I wrote on March 29, it is now clear that the IMF will be doing everything possible to impose draconian conditions on Jamaica. It is now clear that the G20 meeting in London in April laid an egg. Make no mistake about it, the coming IMF measures are going to make the 1970s and the 1980s look like a picnic. We have to work out a strategy to deal with it.

Latvia and Ghana

Prime Minister Bruce Golding (right) and Finance Minister Audley Shaw need to slow down the pace of talks with the IMF and engage civil society in the negotiations.

The best way to arrive at an accurate assessment of what the IMF is likely to demand from Jamaica is not to look at all the fine words from the G20 about the 'Vulnerability Fund' and concessionary financing. Look at deeds instead.

Latvia is a small northern European country with a population a bit smaller than ours - 2.3 million people, but with a much larger GDP - US$27 billion. Latvia signed a 27-month standby agreement, of the very kind Jamaica is seeking, for a loan of US$2.9 billion. In return, the IMF required Latvia to cut its budget deficit from 12 per cent to five per cent by the end of 2009. In order to comply, Latvia was forced to cut public-sector wages by 15 per cent and to cut pensions by 10 per cent. These measures produced severe rioting in Latvia in January and led to the collapse of the government on February 20, 2009.

However, with the Latvian economy contracting further in 2009, government revenues dried up. The budget deficit in Latvia started to head to seven per cent. In June 2009, the IMF halted the disbursement of the second tranche of the loan. The newly installed Latvian government was forced to cut public-sector wages by an additional 20 per cent, and pensions by an additional 10 per cent. In case you are wondering if teachers, nurses and policemen were exempted, the answer is 'no.' None shall escape!

In the case of Ghana, the IMF standby agreement for US$1.2 billion was just completed this Friday, June 26, and is yet to be approved by the IMF board. In the meantime, the IMF has required Ghana to increase fuel prices by 30 per cent in advance of any agreement. The IMF wants all subsidies removed - including for electricity, education and health care. Further, Ghana is to be required to cut its budget deficit by 37 per cent in a single year, from 14.9 per cent of GDP, to 9.4 per cent by the end of 2009. Ghana is a sub-Saharan country with a per capita income of US$510 per year. Life expectancy at birth is 59.7 years. At least 30 per cent of the population lives below the poverty line of US$1.25 per day. None of this has stopped the IMF from socking it to Ghana.

BUDGET FANTASY

It is clear from these experiences that the recently concluded Budget exercise in Jamaica was pure fantasy. The IMF is about to demonstrate that Martin Henry was absolutely right when he presciently declared, "shred the Budget!" Information Minister Daryl Vaz has said that Jamaica is seeking a standby agreement with the IMF.

This is similar to what Latvia is in. Ghana has been vacillating between a standby agreement (the most likely outcome) and the cynically labelled Poverty Reduction and Growth Facility, which carries much softer terms.

The IMF may also impose a devaluation, although so far it has not done so in either Latvia or Ghana. However, most commentators believe that a huge devaluation in Latvia is only a matter of time; and the Ghanaian currency has already been depreciating rapidly from late 2008. I hope the IMF does not push us down the devaluation road, because that will only add a crushing debt, service charge to the budget and require even larger layoffs and wage and pension cuts

NEGOTIATING STRATEGY

What should our negotiating strategy be? First of all, the entire negotiating process must be fully public. Second, we should slow down the negotiations. The idea of a small team of Ministry of Finance and Bank of Jamaica officials slipping off to Washington in the dead of night and signing away our future must be rejected outright. Third, we should insist that the negotiating team include representatives of civil society organisations. Someone from Jamaicans for Justice, or the new group calling for debt rescheduling, for example. Fourth, we must wage a battle against these crushing conditionalities internationally, not just locally.

This is the age of Facebook, Twitter and YouTube. Don't make them fool you, the IMF and the World Bank hate negative publicity. Anything which reveals their gross hypocrisy alarms them no end. We should mount a systematic campaign exposing their hypocrisy to the entire world. The key to our success is to make this campaign as international as possible. Anti-IMF demonstrations are useful but not the crux of the matter.

The contemptible hypocrisy of the developed countries pursuing massive Keynesian deficit-spending programmes while imposing draconian neoliberal austerity on poorer and smaller countries is plain for all to see. The IMF argument that the big, developed countries can pump up their deficits because their currencies are international reserve ones is only another way of asserting that might is right. Keynesianism for the rich, but austerity for the poor. who can swallow such vacuous arguments?

Finally, we must really bite the bullet on debt renegotiation. The hour has long passed when self-serving arguments about protecting our 'international financial reputation' and other such empty pieties, could be taken seriously.

Sacrifices are demanded, and those who should make them are clear: the owners of Jamaican debt, at least 80 per cent of whom are Jamaicans. It is utterly unjust to single out public-sector workers for sacrifice. Is it the public-sector workers who caused the subprime mortgage crisis? Or who speculated on derivatives? Were they the ones who closed the three bauxite-alumina plants? Or cut remittances and tourism receipts? Did they cause the budget deficit, the trade gap, or our 108 per cent debt-to-GDP ratio? Are the nurses, teachers and policemen the ones who caused domestic agriculture to decline? Are the public-sector workers to bear the burden for what is really a failure of the Jamaican and global private sectors and no one else?

We all have to share the burden of austerity fairly and stop mouthing empty platitudes. We need the IMF money not because the IMF solutions are right. In fact they are not right. In fact they are not just. They will hold back, not advance, our economic and social goals. But we need the money. We must fight without illusions and fight hard, too, for the best possible terms.

Feedback may be sent to columns@gleanerjm.com.

Standby agreement

Here is what we in Jamaica can expect from an IMF standby agreement:

1. A reduction in the Jamaican Government's budget deficit from seven per cent to four per cent by the end of the 2009/2010 financial year.

2. A reduction in the inflation rate target from the current 11-14 per cent to about eight to nine per cent.

3. The immediate divestment or closure of Air Jamaica and other public-sector entities.

4. The restoration of user fees for health and education services.

5. A cut in public-sector wages/pensions of about 15 per cent and/or the layoff of about 30,000 workers.

6. Possibly a further increase in gas taxes and/or GCT.