White-knuckling our way to development with IMF

By Jaevion Nelson

Another International Monetary Fund (IMF) Test passed and the media is in a frenzy. One can't help but wonder if we are already reaping the economic benefits of rare earth metals and the logistics hub while the mass of voters grieve the shortage of chicken (back?) and its escalating price tag. Can the media elucidate what the fanfare is all about?

I desperately want to be as chuffed but I need some assurance that critical aspects of economic development such as infrastructure, human capital, social inclusion, health, literacy and numeracy, environmental sustain-ability, competitiveness and safety and security form the nucleus of our current efforts. I want to be convinced that strategy is informed by our needs, our reality and not entirely what bilateral or multilateral partners tell us to do.

Passing the IMF tests alone won't end the abysmal trajectory of growth over the last few decades. There is enough literature cautioning countries to be mindful that, although much has changed, conditionalities can be quite deleterious. We have been borrowing from the IMF for nearly as long as we have been independent (since 1977) and at least 12 of the agreements have been cancelled as a result of performance failure. Five agreements were, however, 'successfully' com-pleted but we are yet to see the benefits of those. Yes, let's commend the Government and Minister Peter Phillips for his stewardship but let's move on. The white-knuckling is a bit much (if you ask me). There is very little guarantee that what we are doing will reduce the rates of poverty or boost economic growth. What we are certain about is hardship - inflation, job cuts, lower social investments, etc.

According to Michael Witter in a July 8, 2012 article titled 'Lessons from the IMF experiences', "In all the loan agreements, the IMF has called for reducing the Government's Budget deficit. Inevitably, this means increasing taxes and reducing non-debt expenditure on social services and economic development projects ... . [In addition], The IMF always asks for exchange-rate flexibility, which means reducing the value of the Jamaican dollar [which then] drives up the costs of imports, and hence all costs, but never stimulates Jamaica's traditional exports. Devaluations may make non-traditional exports more attractive to foreigners, but we have too few of those to make any significant difference to our balance of payments."

In 1982, Mexico, for example - the first country to be declared a 'debtor nation' when it owed its creditors US$80 billion, Jose Lopez Portillo, the president at the time - received a US$4-billion loan from the IMF. Consequently, there were drastic cuts in jobs (more than 800,000), decrease in wages (household income was lower than national minimum wage) and there were increases in the cost for more than 4,000 items which the government had been protecting (so the mass of Mexicans could afford).

Note, I am not suggesting the IMF has no purpose whatsoever. The IMF has been instrumental, to some extent, in helping to stabilise economies in times of financial depression. The loans and technical assistance for fiscal and monetary policy improve-ment and management, while they have had some negative implications in the past, in more recent times seem to be more positive. After all, it took the IMF loan for the Parliament to pass a record number of laws related to, among other things, the business environment, securities dealers, tax and customs administration, and public financial management.

critical questions

I think it is time we start asking some critical questions beyond celebrating the passing of 'tests'. The media ought to provide us with more information about what is happening in the political economy. We need to know why is it that the IMF has not been more successful in reducing poverty and boosting economic growth in Jamaica. We need to know what these structural adjustment programmes/policies will mean for ordinary Jamaicans who are already barely able to make ends meet.

I'm no economist, but I don't think we can grow the economy by passing IMF tests. I, however, anticipate that we might be able to mitigate the debt trap in the near future. We need to know how the IMF agreement will contribute towards the process of making the economy prosperous to the extent that, as outlined in Vision 2030, we have a stable macro-economy, an enabling business environment, strong economic infrastructure, energy security and efficiency, a technology-enabled society, and competitive industries.

Jaevion Nelson is a youth development, HIV and human rights advocate. Email feedback to columns@gleanerjm.com and jaevion@gmail.com.