Letter of the Day | Why is Jamaica returning to the IMF?

THE EDITOR, Madam:

In 2019, Jamaica completed its borrowing arrangement with the International Monetary Fund (IMF), after years of renewed agreements which resulted in austerity measures, economic stagnation, devaluation. PM Holness said at the time, he was looking forward to the post-IMF period and a culture of ‘fiscal responsibility’. The JLP administration continues to paint a rosy picture of the economy, and to be fair, economic growth has been hovering above four per cent since 2021, with some predicting a high of 8% as we move into 2023. On the ground the reality is very different as inflation soars to 10 per cent, and workers are not adequately compensated; public sector workers especially have been restless. The growth rate projection is still significant, considering the average rate is usually very marginal, around one to two per cent, when positive.

It was announced in recent reports that the Government will again pursue the IMF; this time to access a line of credit of US$1.7 billion which would provide funds at much lower interest rate. Described as a “compelling instrument”, funds would support climate strategy, and provide funds to counter global risks. The IMF line of credit would save in interest costs on loan replacement as opposed to going to capital markets for financing. US$1.7 billion is still a lot of money to access and the repercussions for long-term debt repayment and impact on economy could be severe.

The irony is that tourism winter arrivals is expected to earn US$ 1.4 billion in inflows this season, slightly less than the IMF line of credit. The tourism minister projected these numbers recently. While the inflows are encouraging, we need to ask, how much of these inflows will remain in Jamaica to benefit the economy? I think politicians should stop gaslighting the public. Government, like any organisation, will always need debt and access to lines of credit. First-world countries also carry huge debt, but they have the luxury of significant assets and resources as security.

As a small country, we must move strategically towards self-reliance, increasing domestic production for exports which would provide more control over debt management and risks. Jamaica cannot afford to carry significant debt. According to Finance Minister Nigel Clarke, Jamaica is in a relatively good position (economically). Minister Clarke added, “We almost don’t need it (IMF).” So if we don’t need it, why do we have it? And why access so much credit? Did we return to IMF due to fiscal irresponsibility? For example, spending an estimated one billion Jamaican dollars to change the look of our currency which isn’t a priority and which could potentially worsen inflation with increased supply of money in the short term.

P. CHIN

chin_p@yahoo.com