Deprived of EU money - Millions in budget support delayed pending IMF quarterly reviews
Published:Sunday | July 31, 2011 | 12:00 AM
Tyrone Reid, Sunday Gleaner Reporter
Millions of dollars in European Union (EU) aid to Jamaica are on hold because of the finance ministry's failure to publish the results of the last two International Monetary Fund quarterly (IMF) performance reviews of the economy.
Head of the EU delegation in Jamaica, Marco Mazzocchi Alemanni, told The Sunday Gleaner that the money earmarked for the cash-strapped Jamaica Constabulary Force (JCF) has not been disbursed because of the country's failure to get the IMF stamp of approval, and because the force has failed to meet some of its reform targets.
"There are a few things that are still needed to be done (by the JCF), but, in any case, we are not ready to disburse because of the IMF issue," Mazzocchi Alemanni told The Sunday Gleaner recently.
He added: "All budget-support programmes are dependent on you being on track with the IMF programme. If you are not, we cannot do anything, which means on the one hand that you are not going to get the money for the time being, but at the same time it gives you additional time to comply with those conditionalities that are not yet complied with."
It is still unclear as to when the finance ministry will publish the results of the fourth and fifth reviews, which were due on February 28 and May 31, 2011, respectively.
Earlier this year, Finance Minister Audley Shaw said the delay in publishing the outstanding results was related to the public-sector wage negotiations.
The public-sector wage dispute was settled this month, and the heads of agreement between the Government and the various unions representing public-sector workers has already been signed.
Still, the finance ministry has not published the results of the outstanding IMF stress tests.
However, Mazzocchi Alemanni is optimistic that the EU and IMF conditionalities will be met this year, and the release button pushed to commence the disbursement of the funds.
"We still hope to give it this year as long as ... those conditionalities are met, number one being the reform programme in the JCF, and the other that Jamaica is on track with the IMF," he said.
Earlier this month, Shaw told the nation that Jamaica planned to return the bail-out funds it received from the IMF, as he moved to re-engineer the debt-servicing bill on padded foreign reserves.
The finance minister gave few specifics, but said that he would be guided by the central bank on how the give-back would be executed.
That pronouncement came amid speculation that Jamaica might have failed the December-quarter test.
IMF representatives have said they would offer no specific comments ahead of a review of Jamaica's performance by its board review.
In February 2010, the IMF approved a 27-month standby arrangement with Jamaica, which included borrowings of US$1.3 billion and the Financial-Sector Support Fund (FSSF) of US$950 million.
The FSSF was seeded by the IMF's US$450 million, the Inter-American Development Bank (IDB) which gave US$300 million, and the World Bank which provided US$200 million.
Economic reform
Jamaica entered the arrangement seeking support for the country's economic reforms to bolster its balance of payments and to temper the effects of the global economic meltdown. Some of the money was also for budgetary support.
Up to earlier this month, Jamaica had received total disbursements of about US$838.2 million at the end of the third review covering the three-month period to September 2010.
At that time, the IMF reported that Jamaica had performed credibly under the programme.
Shaw, who has since responded to questions raised by the EU, told The Sunday Gleaner via email that, "It has always been the case that the EU and other multilaterals pay attention to the economic programme of the government with the IMF, and that the link between EU disbursements and the IMF programme is, therefore, not new".
"The third and fourth reviews of the Jamaica programme with the IMF have, in fact, been postponed pending the resolution of certain issues including the public-sector seven per cent wage dispute; finalisation of the Clarendon Alumina Partners (CAP) divestment; and discussions on tax and waiver reforms.
"We are confident that, once the review is successfully completed, all the flows from the EU will be quickly disbursed," the minister said.