Seaga backs new agreement with IMF
Published:Wednesday | March 30, 2011 | 12:00 AM
Former Prime Minister Edward Seaga says Jamaica should seek an extension of its borrowing agreement with the International Monetary Fund (IMF) to stop the country from reverting to recessionary conditions when the current standby arrangement ends in 2012.
At the same time, Bank of Jamaica governor Brian Wynter is voicing optimism about Jamaica's prospects this year.
IMF technocrats have already signalled that the fund is open to a new arrangement to buffer Jamaica's frail recovery.
"We are now looking at the prospects for the end or winding-up of the IMF financing arrangement and we need to ask ourselves, where do we go from here?" said Seaga, speaking to a mix of business executives in Kingston.
"If the IMF at the end of that period of financing is not able to offer any further stimuli then we go right back to where we were, back to recessionary conditions," said Seaga, who is also chancellor of the University of Technology.
Wynter, who spoke at the same AmCham Jamaica forum, exuded confidence in contrast.
'Accelerated progress'
"Fiscal year 2011-12 is set to be a year of accelerated progress," said the central bank chief.
"Of greater significance, confidence in the country's economic prospects has been demonstrated by the willingness of local investors to accept lower and lower rates on their investments," he said.
Wynter, unlike Seaga, believes that with recent policy actions by the government, Jamaica is on a path to sustainable growth and development.
But Seaga contends that new funding from the IMF would assist in closing the fiscal and current account deficits.
"If the IMF gets involved with new funding, which would take care of the two problems we have - the two deficit problems, the fiscal deficit and current account deficit - then it would buy us some more time," said Seaga, who also served as finance minister during his term as head of government back in the 1980s.
"Hopefully, this is the view of the IMF," he said. "And, in fact, I believe this is the presentation the government would want to make."
Seaga believes that despite adjustments that have been made, the country is still not in a position to continue on its own without IMF support.
Jamaica's best interest
"Nothing has happened during this period of adjustment to find a way forward for substantial new revenue earners or new foreign exchange earnings, both of which are needed to close those two deficit gaps. And it is only when the deficit or gap can be closed, or in sight of being closed, can we let go of the rope, the lifeline, and say okay, we will take care of ourselves from here," he said.
The IMF representatives, who are Jamaica's main links to Washington, DC, have been explicit in their view that it might be in Jamaica's best interest to extend the agreement.
"We are open to renegotiation," said Trevor Alleyne, Caribbean II Division Chief in the IMF Western Hemisphere Department.
"Touching on the whole issue of confidence, we do know that after the current programme has expired the work is not done," he said at a press briefing in February on the one-year anniversary of the 27-month agreement.
Turning to what needs to be done to achieve growth, Seaga said the focus should be on agriculture and human resources.
"To put us on a path to growth we have to look where our resources are and capitalise; if we do we can grow, if not we will be married to the IMF," Seaga said.