Downer

JAMAICA'S ECONOMY collapsed, compared to other countries, from the early 1970s without any International Monetary Fund (IMF) programme being in place, and this continued after we supposedly started a relationship with the IMF in 1977.

The very first test was missed just three months after entering our first agreement that year, and the would-be two-year programme was suspended.

In 1978 we entered into a three-year programme that was only pursued for one year, when, shortly after renegotiation in 1979, three tests were failed and the programme was abandoned. Basically , therefore, we were not in an IMF programme at all in the '70s.

In contrast, in the 1980s the IMF programmes went all the way for the first five years. In 1981 we got into an agreement that stayed until 1984 and this was extended for another year. However, the 1985 agreement was suspended in 1986 as targets were missed due to the fallout in the bauxite/alumina industry. Harsher measures were sought by the IMF and after a requested tripartite mission of the IMF, World Bank and United States Agency for International Development concluded that the IMF was correct. Jamaica went it alone briefly, possible only because of a reduction in oil prices.

Lost ground regained

In March 1987 we again entered into an IMF agreement. All went quite well until Hurricane Gilbert in 1988. In this period we were in an IMF programme virtually throughout and we regained lost ground against other countries. Gains continued in the 90s when there were three agreements with the IMF which all went the full term with the last expiring in 1996.

From 2000 until 2007 when there was no IMF programme, there has been a new sustained plunge relative to other countries, almost back to the low we hit in 1980.

Can we learn from this as we now plan for an imminent new IMF relationship?

Since 1970, Jamaica's gross domestic product has declined drastically, compared to other countries of every political persuasion, geographical location, topography, health indices, corruption levels, debt service ratios and crime levels, some worse than ours. Excluding the very special case of Zimbabwe, we only bettered, point to point Guyana, Cuba, and Ghana, but even they show gains against us in the 2000s:

From being 50 times the size of each of Belize's, St Lucia's and Antigua's economies in 1970, we are now only 10 times the size of each. From being about eight times the size of Barbados we are now just three times its size and in the case of the Bahamas we went from four times its size to less than two times. From four times the size of Haiti and 80 per cent of the size of the Dominican Republic in 1970, we are now only half that and getting worse. Yes, even Haiti. The same pattern exists even for the failing state of Pakistan.

Almost invariably, from a high point for Jamaica in 1970, there has been a drastic decline until the early '80s, and we recovered as we embarked on structural adjustment. A strengthened upward trend happened when we abolished exchange controls in the early '90s. The plunge started again in the late 1990s and continued until 2007.

Perennial comparative advantages and disadvantages like location, crime, education, health, politics, resources and so on do not primarily come into the pattern of our relative per-formance from one period to the next. It is the leaders alone that make the difference between the relative performances of countries from one period to another by making the best of what they have to work with. We should start to benchmark like this regularly.

A big part of Jamaica's problem is effectively managing IMF programmes. In the 1980s the prime minister took charge of the finance portfolio and the implementation of the IMF programme. He was a strong leader who could fire ministers. He prevailed despite 'gangs of five'. No pushover or blind acceptor of conditions, he defied the IMF even to the point of holding up payments to the IMF to maintain the long-standing J$5.50 exchange rate.

In the 1990s we had the benefit of momen-tum and an infrastructure of 1980s-cultivated technocrats. Implementation of the IMF espoused policies was ineffective in the '70s and effective in the '80s and '90s and there was no programme forcing responsible borrowing thereafter.

The challenge

Have we now, at this point in 2009, 13 years since we were last in an IMF programme, still got on board the disciplined civil service technocrats and other resources that can effectively manage a new IMF programme? A new push for adjustment requires the cooperation of ministries and ministers, but they need to be properly monitored by the prime minister himself and face consequences if they do not deliver. Progress reports from those that have turf to protect are not always reliable.

If the non-results of the privatisation efforts of the last two years are a guide, it may well be that the ability to implement and complete things is lacking once again.

Effective management of the IMF pro-gramme is not the be-all and end-all for us to regain lost ground. However, today it might be the biggest single thing that we need to do, and do well. Should the PM himself take full charge of this?

Richard Downer, CD, FCA, was senior partner of PricewaterhouseCoopers Jamaica and assisted in the economic reform of many countries. In the 1980s he was head of the Bureau of Management Support in the Office of the Prime Minister of Jamaica.