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The IMF agreement and election politics
CLAUDE ROBINSON
Sunday, October 16, 2011
"The structural reforms that we mapped out, that we are saying needed to be done, and done within the window of opportunity, that window is closing and the reform is not taking place — or at least, it is being delayed."
Those are the words of Dr Gene Leon, senior resident representative of the International Monetary Fund (IMF) in Jamaica. They are as close as an international technocrat can come to pointedly criticising the government of a member state for not living up to its end of a deal with the multilateral agency.
GOLDING (right) and HOLNESS… held meetings with the multilateral agencies in Washington, DC
(L-R) LAGARDE… met with Prime Minister Bruce Golding and Education Minister Andrew Holness in Washington, DC Thursday. LEON… at some point you have to take the bull by the horns and make some tough choices
The remarks, at a Jamaicans United for Sustainable Development summit at the Spanish Court Hotel in New Kingston last Wednesday, followed similar comments in an unprecedented interview with Dionne Jackson Miller aired on TVJ last Sunday in which Dr Leon spoke of an "impasse" between the fund and the Bruce Golding administration.
At issue was whether the Government had in place enough policies and programmes "that can give us a reliable chance of reaching the medium term objectives" of the 27-month Standby Agreement entered into in February 2010 with much optimism for stability and growth.
The underlying message is clear: the Jamaican Government must quickly take some politically tough decisions in order to get the programme back on track and get access to much-need IMF money. "At some point you have to take the bull by the horns and make some tough choices," Dr Leon said.
But as the country enters into general election mode, several questions arise: Why is Dr Leon suddenly accessible to the Jamaican media and public forums? Will the intervention impact the timing of the elections and the debate about how to get the economy really growing and creating the much-promised "jobs, jobs, jobs"?
Under the current agreement Jamaica can draw down US$1.3 billion from the IMF if the country meets quarterly targets along the way. The IMF 'seal of approval' also opens the way to just over US$1-billion from other lenders like the World Bank of the Inter-American Development Bank.
The first three reviews went well, even with the occasional hiccup. The fourth and fifth reviews (December 2010 and March 2011) have not been conducted and there is no date as to when this may happen. Subsequent reviews are not even being contemplated.
Why the impasse? The Government has not been able to come up with a credible programme that technocrats like Dr Leon can take to the board of the IMF. If there is no chance of getting approval, there is no point in taking it to the board; or, as some would say, you don't take a test that you know you will fail.
Specifically, the Government will have to show that it has the will and the way to reduce the public sector wage bill to agreed levels; that it has enough surplus (after expenses) to reduce the stock of debt by paying down on the principal; that it will reform the tax system to spread the burden equitably while increasing revenue by drastically reducing waivers to some taxpayers.
Until Dr Leon spoke, Government had been stressing that they had met most of the quantitative targets, giving the impression that there were minor points of disagreement. Now, we know different.
Criticism is not accidental
According to the IMF official, the fund will not be satisfied with general statements about reform. For example, the Government can't just say 'tax reform is on the table'. It must have specifics "to show that it will produce the necessary revenue and create growth and jobs."
Jamaica has had agreements with the IMF, on and off, for decades. Conditions attached to these programmes have sometimes come in for much public criticism from many of us who saw them as too restrictive. Structural adjustments were particularly painful on the poor and the economically most vulnerable in society.
But when these debates raged in the late 1970s under Michael Manley as prime minister and the 1980s under Edward Seaga, IMF officials were neither seen nor heard, for the most part. Why now?
The first thing we need to understand about Dr Leon's intervention in the public square is that it is neither accidental nor unilateral. By the very nature of multilateral organisations, it is safe to assume that he not only had the approval of the IMF bosses in Washington about what to say and when to say it, but the Jamaican authorities would have been given prior warning so as to prevent any diplomatic unpleasantness.
Further, the message would have been reinforced when Prime Minister Golding and minister of education, Andrew Holness met with the managing director of the IMF, Christine Lagarde, in Washington, DC Thursday as part of a round of meetings with the multilateral agencies.
According to Jamaica House, the discussions centred on "critical issues" including tax reform, fiscal consolidation and measures to ensure that the targets set out in the medium term economic programme are met.
"These include the steps necessary to ensure that benchmark indicators such as the wage-to-GDP and debt-to-GDP ratios are brought in line with the programme targets. Firm measures to protect revenues, including containment of discretionary waivers, were also discussed, as well as the steps being taken to reform government pension arrangements," the statement said.
It added that the outgoing prime minister and the man who will soon succeed him "reaffirmed the Government's commitment to the programme" while the IMF boss assured them of the fund's "continued support for Jamaica's efforts to ensure sustained macro-economic stability as a prerequisite for investment and growth".
So, when we take the statements coming out of Kingston and Washington, the IMF is clearly stating that there is no alternative to meeting the agreed targets and that Mr Holness is committed to doing what Mr Golding had not been able to do.
Implications for election and campaign agenda
Meanwhile, speculation last week was that Mr Golding would step down in time for Mr Holness to be installed as prime minister this week, probably Thursday. This would give him the latitude to call the election when he thinks the JLP has the best chance of winning.
Reducing public sector wage costs to the agreed levels involves major political risks. For instance, it could include major cuts in staffing (the figure 20,000 has been bandied about); it must include cutting benefits and entitlements; and it must include requiring public servants to contribute to their pension schemes.
Increasing revenue must include securing greater tax compliance and terminating waivers, especially to large commercial enterprises.
These are necessary reforms, but we know that there will be huge pushback from individuals and organisations which will be adversely affected. Hence, a government without credibility and authority and a leader without steely resolve will have no chance of success. Among other things, the leader must have the patience, the skill and the temperament to negotiate buy-in from divergent special interests.
Against that background, I believe the prime-minister-in-waiting will use the bounce created by Mr Golding's departure to ask for a mandate as soon as possible. Various scenarios suggest an election anywhere from late November to December 22 or sometime in January-February 2012.
What's not expected is that Mr Holness will serve out the rest of the time constitutionally due, that is, up to December 2012. That would all but guarantee defeat. That is not to say early polls will guarantee victory. It will just give him a chance against the PNP, which has not lost ground over the past four years and which has been re-energised by the prospect of an early election.
More important, there are no easy options ahead; and voters must look beyond promises to specifics. Like it or not, the IMF is once again part of the political discourse.
kcr@cwjamaica.com
Read more: http://www.jamaicaobserver.com/colum...#ixzz1az7Uy51L
CLAUDE ROBINSON
Sunday, October 16, 2011
"The structural reforms that we mapped out, that we are saying needed to be done, and done within the window of opportunity, that window is closing and the reform is not taking place — or at least, it is being delayed."
Those are the words of Dr Gene Leon, senior resident representative of the International Monetary Fund (IMF) in Jamaica. They are as close as an international technocrat can come to pointedly criticising the government of a member state for not living up to its end of a deal with the multilateral agency.
GOLDING (right) and HOLNESS… held meetings with the multilateral agencies in Washington, DC
(L-R) LAGARDE… met with Prime Minister Bruce Golding and Education Minister Andrew Holness in Washington, DC Thursday. LEON… at some point you have to take the bull by the horns and make some tough choices
The remarks, at a Jamaicans United for Sustainable Development summit at the Spanish Court Hotel in New Kingston last Wednesday, followed similar comments in an unprecedented interview with Dionne Jackson Miller aired on TVJ last Sunday in which Dr Leon spoke of an "impasse" between the fund and the Bruce Golding administration.
At issue was whether the Government had in place enough policies and programmes "that can give us a reliable chance of reaching the medium term objectives" of the 27-month Standby Agreement entered into in February 2010 with much optimism for stability and growth.
The underlying message is clear: the Jamaican Government must quickly take some politically tough decisions in order to get the programme back on track and get access to much-need IMF money. "At some point you have to take the bull by the horns and make some tough choices," Dr Leon said.
But as the country enters into general election mode, several questions arise: Why is Dr Leon suddenly accessible to the Jamaican media and public forums? Will the intervention impact the timing of the elections and the debate about how to get the economy really growing and creating the much-promised "jobs, jobs, jobs"?
Under the current agreement Jamaica can draw down US$1.3 billion from the IMF if the country meets quarterly targets along the way. The IMF 'seal of approval' also opens the way to just over US$1-billion from other lenders like the World Bank of the Inter-American Development Bank.
The first three reviews went well, even with the occasional hiccup. The fourth and fifth reviews (December 2010 and March 2011) have not been conducted and there is no date as to when this may happen. Subsequent reviews are not even being contemplated.
Why the impasse? The Government has not been able to come up with a credible programme that technocrats like Dr Leon can take to the board of the IMF. If there is no chance of getting approval, there is no point in taking it to the board; or, as some would say, you don't take a test that you know you will fail.
Specifically, the Government will have to show that it has the will and the way to reduce the public sector wage bill to agreed levels; that it has enough surplus (after expenses) to reduce the stock of debt by paying down on the principal; that it will reform the tax system to spread the burden equitably while increasing revenue by drastically reducing waivers to some taxpayers.
Until Dr Leon spoke, Government had been stressing that they had met most of the quantitative targets, giving the impression that there were minor points of disagreement. Now, we know different.
Criticism is not accidental
According to the IMF official, the fund will not be satisfied with general statements about reform. For example, the Government can't just say 'tax reform is on the table'. It must have specifics "to show that it will produce the necessary revenue and create growth and jobs."
Jamaica has had agreements with the IMF, on and off, for decades. Conditions attached to these programmes have sometimes come in for much public criticism from many of us who saw them as too restrictive. Structural adjustments were particularly painful on the poor and the economically most vulnerable in society.
But when these debates raged in the late 1970s under Michael Manley as prime minister and the 1980s under Edward Seaga, IMF officials were neither seen nor heard, for the most part. Why now?
The first thing we need to understand about Dr Leon's intervention in the public square is that it is neither accidental nor unilateral. By the very nature of multilateral organisations, it is safe to assume that he not only had the approval of the IMF bosses in Washington about what to say and when to say it, but the Jamaican authorities would have been given prior warning so as to prevent any diplomatic unpleasantness.
Further, the message would have been reinforced when Prime Minister Golding and minister of education, Andrew Holness met with the managing director of the IMF, Christine Lagarde, in Washington, DC Thursday as part of a round of meetings with the multilateral agencies.
According to Jamaica House, the discussions centred on "critical issues" including tax reform, fiscal consolidation and measures to ensure that the targets set out in the medium term economic programme are met.
"These include the steps necessary to ensure that benchmark indicators such as the wage-to-GDP and debt-to-GDP ratios are brought in line with the programme targets. Firm measures to protect revenues, including containment of discretionary waivers, were also discussed, as well as the steps being taken to reform government pension arrangements," the statement said.
It added that the outgoing prime minister and the man who will soon succeed him "reaffirmed the Government's commitment to the programme" while the IMF boss assured them of the fund's "continued support for Jamaica's efforts to ensure sustained macro-economic stability as a prerequisite for investment and growth".
So, when we take the statements coming out of Kingston and Washington, the IMF is clearly stating that there is no alternative to meeting the agreed targets and that Mr Holness is committed to doing what Mr Golding had not been able to do.
Implications for election and campaign agenda
Meanwhile, speculation last week was that Mr Golding would step down in time for Mr Holness to be installed as prime minister this week, probably Thursday. This would give him the latitude to call the election when he thinks the JLP has the best chance of winning.
Reducing public sector wage costs to the agreed levels involves major political risks. For instance, it could include major cuts in staffing (the figure 20,000 has been bandied about); it must include cutting benefits and entitlements; and it must include requiring public servants to contribute to their pension schemes.
Increasing revenue must include securing greater tax compliance and terminating waivers, especially to large commercial enterprises.
These are necessary reforms, but we know that there will be huge pushback from individuals and organisations which will be adversely affected. Hence, a government without credibility and authority and a leader without steely resolve will have no chance of success. Among other things, the leader must have the patience, the skill and the temperament to negotiate buy-in from divergent special interests.
Against that background, I believe the prime-minister-in-waiting will use the bounce created by Mr Golding's departure to ask for a mandate as soon as possible. Various scenarios suggest an election anywhere from late November to December 22 or sometime in January-February 2012.
What's not expected is that Mr Holness will serve out the rest of the time constitutionally due, that is, up to December 2012. That would all but guarantee defeat. That is not to say early polls will guarantee victory. It will just give him a chance against the PNP, which has not lost ground over the past four years and which has been re-energised by the prospect of an early election.
More important, there are no easy options ahead; and voters must look beyond promises to specifics. Like it or not, the IMF is once again part of the political discourse.
kcr@cwjamaica.com
Read more: http://www.jamaicaobserver.com/colum...#ixzz1az7Uy51L