Friday, May 29th

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Economic woes not over

By Terry Nisbett

Jamaica is paying more to the Internal Monetary Fund (IMF) than it is getting in disbursements for its current assistance programme. Poverty rates in Jamaica have increased since the start of the current IMF programme in that country. These are some of the concerns being voiced in Jamaica and elsewhere. To this end, the Caribbean country has even sought the assistance of some members of the United States Congress. The five members of Congress, according to the Jamaica Gleaner, are Maxine Walters, Yvette Clarke, Charles Rangel, Sheila Jackson-Lee and Gregory Meeks. They have written to President Obama asking for a "revisit of the terms of Jamaica's IMF program". The representatives were particularly concerned about the condition that Jamaica must show a budget surplus of 7.5 percent annually for the next three years and asked that this be lowered. They were also asking for maturity dates of loans given to Jamaica by international development banks to be extended. In effect, it seems Jamaica would like to renegotiate its current loan arrangement with the IMF.

Jamaica's comments are not just moaning complaints. In a press briefing, Gerry Rice, IMF Director of Communications admitted that in 2014-2015, Jamaica received disbursements of $259 million and made repayments of $422 million, which means it paid $163 million more than it received. That is a significant difference of money going out in an arrangement that is supposed to be helping Jamaica. It definitely does not appear helpful and neither could it have been helpful to be paying out almost twice what it received in a situation in which Jamaica could have usefully employed that $163 million. One would wonder if the IMF was unaware of this and could not have made some adjustment. We could also say that Jamaica should have asked for a consideration but perhaps they did. The assurance by Mr Rice that in 2015-2016 and 2017-2018, disbursements would be greater than repayments is not really consoling under the circumstances.

Mr. Rice, however, as expected did not admit that there was any connection between the IMF programme and increased poverty in Jamaica, laying the blame instead on general increase in global poverty as a result of the recession. It is true that the global recession worsened the poverty situation in many countries. However, one cannot help but wonder if lower repayments would not have meant more funds would have been available to reduce poverty on the island. Jamaica has had worse times with the IMF when conditions for loans were even more punitive on the general population. IMF conditions may be less severe but implementation of measures to achieve lower expenditure can still impact people's lives.

Currently, Jamaica will be closing 18 primary schools for a saving of $23 million. Perhaps it will make public sector spending decrease, but there are many social costs associated with the moving of children out of their neighbourhoods and trying to integrate students into larger schools in different areas. In the longer term, too, the cost of transportation for taking these children to different schools may eventually outweigh the present benefits. Even some Jamaicans are fearful that eventually the financial burden of moving to the new school will fall on the parents.

While we wait to hear whether the appeal to the Obama administration will have any effect on the Jamaica-IMF arrangement, we can at least acknowledge that it was an interesting initiative whether through diplomatic efforts or through Jamaican diaspora to seek the help of the group of members of the US Congress.

Even developed countries are facing difficulties with government spending. At this time, instead of using Greece as an example, we can look at the United Kingdom that wants a saving of £13 billion from its government departments. Recently, the Chancellor required those departments that were not exempt, such as Health, to present a plan to show how they would cut 40 percent of their spending. That is a significant threshold to ask of a department. That is practically asking departments to reduce their spending by half. Unless there was much waste initially, it would be difficult to trim expenses and not reduce personnel and there may even be the danger of reducing services.

Generally, with the slowdown in the Chinese economy and the debt difficulties still facing the islands of the Caribbean, it is not just Jamaica in our region that would be concerned about the future.