Mark Ricketts | Time to rethink economic implications - Jamaica engages IMF but the cost of the pandemic remains high

On Tuesday, April 14, the International Monetary Fund downgraded Jamaica’s growth prospects to -5.6 per cent. This is a severe contraction warranting substantial Government intervention. However, at times, the Government waits too late to respond. By then, the proverbial horse has already gone through the gate.

The need for big-money investment becomes even more pressing when our growth figures for last year were, a paltry 0.9 per cent, and not too long before that, we lost a good portion of our export earnings when JISCO, formerly Alpart, closed its doors for plant upgrading.

After my last column titled ‘Government must call in the IMF’, I was deluged with comments from readers about the economic hardship they were experiencing. Some business owners cited the inevitability of bankruptcy when just a few weeks earlier, they had been talking expansion and hiring additional workers.

Others, bemoaning the absence of time to put their business in order, spoke about their inability to make redundancy payments to some of their most trustworthy and valuable workers who have been with them for a long time.

Some employees despaired at the suddenness of this health-driven economic devastation, which caught many of them off guard -the fact that they got laid off so unexpectedly, and without any warning, which will add challenges to their survival in the weeks ahead.

People are in tears, are hurt, sad, ensconced in their land of make belief, with rhetoric shrouded in a plaintiff voice, “You think this is going to go on for a long time? We need help. I agree with you. We should go to the IMF.”

There was a time, in the early days yet, when there was calm and a modicum of reassurance. Individuals and businesses presumed the coronavirus pandemic would be short-lived and would lack the severity to prod anxiety. The thinking the was that ,work would have restarted by this and income flows would have allowed comfort to overcome concerns. But that has not been the case.

Depressing news

Bank loans and insurance payments, even with deferrals, are coming up soon, and food purchases, with everybody home are draining cash flow. And what of overdue house-maintenance payments, and rent and mortgage, and current and outstanding utility bills, car licence, government fees and taxes, and medication. Everything is bunching up faster than people surmised.

But for many persons, it is more than being exposed to the coronavirus health crisis. Now, there is a spate of depressing news, all within a matter of two to three days, which began on Tuesday.

All of a sudden, as if we were attaining some badge of honour with a triple-digit coronavirus-positive score, we galloped past the century mark of people testing positive with undue haste, quarantining over 30 in one day. When the multiplier effect of that is factored, and an entire parish, St Catherine, is locked down, and the encouraging prospects of the BPO sector are tempered because – 52 workers in one company tested positive, then we have to stop and wonder.

Lay-offs and any significant contraction of BPOs would be an economic disaster for the country. BPOs were so pleasantly defined by Paul Clarke on The Gleaner’s front page on Tuesday “as a fast-rising job sponge in Jamaica over the last decade, accounting for a workforce of over 40,000. Surely, BPOs must remain vibrant as it offers work experience and training to so many school leavers and entry-level workers who ultimately can improve their skill sets, and, where relevant, uplift their professional experience”.

But, as I said earlier, we have a tendency to scurry to do the right thing after the horse has bolted. For weeks, TVJ has been highlighting some BPOs not following established protocols. Workers, who risked their jobs being interviewed by the station, provided troubling details of their work situation and the absence of social distancing.

It is sad watching a government trying so hard to implement tough measures at an extremely difficult time yet is so tardy in reacting to a sector with such employment and earnings significance.

It is the same inattention to details and to advance preparation that let Government declare curfew switches from 8 p.m. to 3 p.m. and lock down entire communities without sending appropriate signals to suppliers, supermarkets, and transport operators.

What follows is the contradiction of survival under a curfew. A curfew is imposed to get people to stay at home so as to better ensure social distancing. When people bunch up in desperation to fight to get in the supermarket for food or congregate in groups to secure the last bus home, that negates the benefits of the curfew.

Compounding the country’s woes, the Ministry of National Security, Dr Horace Chang, announced that the United States would be deporting undocumented Jamaicans at a faster pace.

Raise confidence

In spite of these troubling and costly developments, Finance Minister Dr Nigel Clarke originally preferred that Jamaica managed its own affairs by more expansive monetary policy, by reducing the primary surplus percentage, and by extending the period in which Jamaica has committed itself to reducing its high debt-to-GDP ratio.

Dr Clarke adopted these positions because the question of economic independence is a highwater mark for him, but now with the severe contraction of economic growth that IMF and other rating agencies have projected for Jamaica, the finance minister has taken the prudent step to engage the IMF.

Such an approach will raise confidence in the business community and ease some of the financial and economic anxieties currently afflicting the country.

With export earnings from visible trade in decline, the tourism sector closed, with remittances down, with a large section of the ownership structure of business enterprises in the country being foreign-owned, there is significant pressure in the foreign exchange market, thereby justifying as insurance the availability of additional funds from the IMF.

A global pandemic has all the hallmarks of longevity and slow recovery, plus a serious decline in government revenues, thereby constraining fiscal space.

In addition, we can’t forget that our society has many of its residents living hand to mouth, that we have a very large informal economy, and a major driver of the economy, the consumer, is asked to stay at home, and the multiplier effect of the virus appears to be rearing its ugly head. That says to me that we need a lot of money, and we need to manage it carefully.

Mark Ricketts is an economist, author, and lecturer. Email feedback to columns@gleanerjm.com and rckttsmrk@yahoo.com