'Government of Jamaica needs longer-term IMF plan to move ahead'
Published:Friday | January 21, 2011 | 12:00 AM
Laura Redpath, Senior Gleaner Writer
With the current International Monetary Fund (IMF) agreement slated to end in 2012, the CEO of Scotia DBG Investments Limited is advising the Government to explore a longer-term arrangement with the lending agency.
Anya Schnoor, who is also Scotiabank Group's executive vice-president, predicted that Jamaica's economic growth would remain stunted despite the 27-month agreement to allocate funds eventually amounting to US$1.2 billion.
"The important question that arises is what happens after the IMF agreement runs out and the debt-gross domestic product (GDP) is still close to 130 per cent and economic growth is still anaemic?" asked Schnoor, who was addressing Rotarians during the Kingston chapter's luncheon at The Jamaica Pegasus hotel in New Kingston yesterday afternoon.
Schnoor outlined that Jamaica's balance-of-payment issues stem from an uncompetitive economy, and the Jamaican Government should look into converting its current standby agreement into an extended fund facility.
While the standby agreement is meant for countries with short-term balance-of-payment issues, the extended fund facility would allow Jamaica to make repayments for up to eight years and would, Schnoor argued, give the country "real breathing room".
"We have to go back to the IMF because nothing has changed. Yes, things have stabilised, but it's not like the economy is growing," she said.
"Twenty-seven months is not enough to change ... . We need real time to correct years of bad policy decisions," said Schnoor, who acknowledged stability as one positive resulting from the agreement.
Macroeconomic environment
In order to counteract stunted growth, Schnoor noted that a stable macroeconomic environment was necessary to promote financial development and improve Jamaica's competitiveness.
In terms of the country's macroeconomic environment, she said Jamaica's performance has been poor, according to the latest global competitiveness report, as the country ranks 137 out of 139 nations.
"We can debate all we want and ascribe responsibility to the failure of policies. The fact is, we have not done a good job holding our leaders to the highest standards," she said, providing background for the current economic struggle.
According to Schnoor, the current economic struggle has roots in the 1970s-1980s which, she said, was a time period during which the increased presence of the Government in the economy, grouped with socialist sentiments, resulted in "huge fiscal deficits".
"Our debt-to-GDP ratio went up tremendously ... so we made some decisions to borrow. Now, that doesn't encourage investment," she said.
The CEO highlighted three other key areas in which Jamaica should pay keen attention and these are institutions, infrastructure and labour productivity.
She also said Jamaica's business infrastructure was not as competitive as those of neighbouring Barbados and Trinidad and Tobago.
"A major competitive disadvantage for Jamaica is the cost of energy for consumers and producers. Any long-term improvement in Jamaica's competitiveness must include energy diversification and lower cost of energy," she suggested.