EDITORIAL - Talking frankly about the IMF agreement

WE CAN'T say that it was with absolute clarity, but Wesley Hughes, the financial secretary, has provided more substance, with greater frankness, about the dangers facing the economy and Jamaica's agreement with the International Monetary Fund (IMF) than was offered by Finance Minister Audley Shaw when he addressed these issues recently.

Where Mr Shaw sought to spin, sugar-coat and fancy package when he addressed these issues, Dr Hughes, to put it bluntly, conceded that the programme around which the Government structured a US$1.3-billion standby agreement with the IMF is in serious trouble

"The whole programme is structured on the assumption that there would be a return to growth in the United States and Europe, but it is a new reality," Dr Hughes told Parliament's Public Administration and Appropriations Committee on Tuesday.

Some good points

The upshot: economic targets will have to be revised, mostly downward. That means, too, that the agreement with the IMF will have to be renegotiated, although that was not the term used by Dr Hughes, and one from which Mr Shaw has attempted to stay far.

That approach, this manipulation of the spigot - allowing information, and its context, only to dribble out - is wrong. It is not the way to build consensus around productivity and competitiveness, the lifting of which Dr Hughes posited as fundamental to hauling Jamaica out of its economic quagmire.

Or, more to the point, buy-in from the public has to be paid for with honesty and transparency on the part of the administration. In that regard, the Government should be honest about the state of the agreement with the IMF and the strategy being pursued for its resuscitation.

For instance, the agreement with the Fund requires quarterly performance reviews of the economy, the first two of which were heralded with great fanfare and announcement by the administration that all performance targets were met. Since then, three quarters have elapsed - we are now into a fourth - since a review was completed. This has not only held up inflows from the Fund, but other multilateral and bilateral agencies as well. Yet, Minister Shaw did a semantic dance around the matter, insisting that Jamaica had failed no IMF performance tests since no reviews were done.

Issues requiring clarification

What Mr Shaw did not say, however, and which remains unclear, is whether the agreement signed with the IMF in early 2010 remains intact, whether a new one is in place, and how, specifically, the administration intended to engage the Fund.

Dr Hughes, on Tuesday, went a little way in removing the facade of normality, conceding in a way that Mr Shaw didn't, that things are far from rosy. The Government's lifting of the public-sector wage freeze and paying employees a seven-per cent hike would contribute to the difficulties, making it more problematic to lower the public-sector wage bill from nearly 12 per cent of GDP to the nine per cent envisioned under the IMF agreement.

"How are we going to ensure that the objectives of the programme remain intact?" was Dr Hughes' question. "Unless we find a way to put that back, it will put the medium-term targets off track."

Now, this is a frank conversation with the people that Mr Shaw, Prime Minister Bruce Golding and others of the political administration must urgently engage.