On the road to 16 IMF loans and an avg of 0.4 %growth

[Don1]

or bond market. Whatever you like. It is the same exchange. that is your contribution? Thanks

Yep that was my contribution...

It's not the same market

[Rockman]

In hindsight it is clear the interest rate ballooned to 300+% and not the capped !00%.
Do not be swayed by the 50% of the last 100+ millions appropriated to the Govt, its overall percentage take is far less than that.
We also know, in most cases, the principal loan was paid(many times over)hence the Govt is wrong in suggesting failure in the process by accepting a flat rate of 30%(much closer to its actual take) from all the Jamaican businesses.
We all see the FINSAC debacle as a HUGE failure but make no mistake,it was a striking example of capitalism at its best.

[Rockman]

Where have you been?
Sure, Peter just like Shaw,has not said anything SPECIFIC about the conditions of the loans.Do you remember Bruce's promise to the nurses in Jamaica before he was elected,it became a contentious issue because of the hidden conditions of the(Invisible Govt) IMF loans.
The IMF only interest in Jamaica and everywhere else is playing its role in advancing global dominance.
A large amount of our budget will be debt payments, hence you have even less money to spend on health care,education,wages capped,unemployment increases etc but then there will always be our dark skin color and derelict politicians to blame.
It also demand that foreigners have free access to our resources, inept politicians selling everything we have(even stuff nailed down..)which equates to the transfer of public wealth to private(in this case Foreign)hands.
How will we export more?

[Rockman]

OBTW, regarding pushing the limits, the IMF only gets away with things if we are not informed citizens.Our ignorance is crucial to their success.

[Sir X]

Edward Seaga, Contributor

A popular view held is that as soon as an International Monetary Fund (IMF) agreement is signed, and there is no doubt now that it will be, the funds due from the multilateral institutions will begin to flow. At that point, the problems of the economy will be over, it is assumed, although much pain is expected to follow. This impression of completion is far from the truth.

The present discussions with the IMF involving the domestic Budget are only one important component of the total picture. It is one leg of a stool, wobbling, slipping and collapsing, if left to stand alone. The second leg of the stool must be installed for the stability needed to generate growth.

This second leg of the stool is the external Budget, which deals with foreign-exchange flows. The current discussion with the IMF is on the fiscal, or domestic, Budget, which is concerned with financing in Jamaican dollars. Solutions to both Budgets, domestic and external, are required to produce the complete picture.

The external Budget deals in foreign exchange earned and spent. The difference between income and expenditure is reported in the balance-of-payments account which sets out the surplus or deficit in foreign exchange and what gap exists.

Some countries, like China, have a massive surplus in foreign exchange, amounting to more than a trillion dollars; others have deficits resulting from spending more than is earned. Jamaica is among the deficit countries. It has experienced shortfalls in the last several years, especially in its balance of trade between imports and exports: See table.

These deficits have to be paid, or the accumulated arrears could create future problems in future payments and residual borrowings which could be disastrous to the functioning of the economy.

The total deficit balance set out above covering the last dozen years is very relevant to the huge indebtedness of the Jamaican economy of $1.7 trillion, which is currently more than 140 per cent of GDP and, according to the 2012-2013 Global Competitiveness Report, is almost the highest in the world. To indicate the danger of such deep indebtedness more fully, a recent news item in one of the top newspapers in the United States, The Chicago Tribune, points out the damage as follows:

"Jamaica has more debt in relation to the size of its economy than any other country and warned against the island becoming what it labelled 'The Greece of the Western Hemisphere'.

"It has tried to restructure its loans to stretch them out over more years, at lower interest rates, with no success. Such a move would be risky for its already nervous lenders," the paper said.

"To set itself straight, Jamaica needs a restructuring, and a bailout with significant debt relief. No way can a small economy that has limped along with growth at less than half the global average for two decades pay back the fortune that it owes," the paper said.

"Defaulting on its debt would ruin Jamaica's prospects for many years to come: It would undermine the island's critically important trade relations with the US. It would discourage badly needed foreign investment in its tourism, agriculture and mining sectors. The only thing worse than doing what Jamaica must do to live within its means would be not doing it," it continued.

debt default not possible

There is an overstatement in the above quotation which refers to the possibility of defaulting in the payment of debt. The Constitution of Jamaica does not allow for any default in debt payments. All such payments have to come off the top of the revenue, which means that debt servicing has to be paid first before any other payments are made from the Budget.

Essentially, this means the debt problem is the crisis point of the economy, and the balance of payments must be kept under control to show surplus earnings, or modest deficits at the most.

How is this to be accomplished? Imports and exports make up the most dynamic elements in the balance of payments account. Imports are dominated by the cost of oil for energy, currently some US$944 million per annum, while total export earnings were US$1,662 million. In fact, a comparison between exports and the cost of oil shows that it requires 56.8% of export earnings to pay for oil imports.

Faced with a gap of US$4.261 billion to cover the deficit in the balance of payment account for 2011 would require an increase of 256% in export earnings or a 72% cut in imports. Both of these are highly unlikely, even impossible, unless there is a mega transformation of the Jamaican trade economy. Notwithstanding the enormity of such an effort, a meaningful impact can be made.

In the case of imports, the country has to stop its shameful display of inability and come to a conclusion by taking a decision about whether liquefied natural gas (LNG), a petroleum product, or coal should be the choice. The split position which appears to be emerging is between LNG and coal as the major source of energy for the nation. LNG is also low cost at this time, but is very likely to increase substantially as peak oil approaches in the next few years. Peak oil is the point at which the global supply of oil begins to decline until no more oil remains at some point near the middle of the century.

go with coal

As the decline of global oil occurs and the price of LNG moves up dramatically, the current problem of unaffordable fuel prices will reoccur. The price of coal, on the other hand, is not likely to be as volatile, given the need of the major supplier, the United States, to maintain prices at an industrially competitive level. It seems foolhardy in these circumstances to take a gamble on LNG, especially if future price movements will revert the economy to the same condition of exceptionally high prices.

Exports have no such prospects of any dynamic increase as things stand now. Increases will be incremental, with slow movement failing to close the balance of payments gap. The ultimate position then would be that the balance of payments gap would continue to substantially increase the national debt.

It will need creative thinking and dynamic action, both of which are sadly lacking now and over most of the past 20 years to close the balance of payments gap, to figuratively provide the stool with a second leg for stability. This is the missing link.

But where is this giant leap forward in developing the huge new export earners? New prime land for hotel development has been almost fully used up in the recent Spanish hotels' expansion. Bauxite/alumina resumption is still tentative and likely to be settled with deeply reduced benefits. The recently announced proposed project to recover rare-earth minerals from bauxite/alumina 'red mud' would be a big step forward to boost earnings, if proven viable.

Agriculture, while showing some improvement in domestic cultivation, continues to stagnate in exports unless the Chinese cultivation of sugar cane, with new capital and technology, shows marked success, warranting expansion. Current growth in sugar exports, while being dynamic in the local setting, is too small to be startling. Among the dominant export earners, this leaves remittances to continue its role as the star performer, with steady but modest incremental growth.

Of these main export activities, transfers from remittance dollars are almost fully converted to foreign exchange. The conversion ratio for tourism and bauxite is 35%, and 45% retention of foreign exchange, respectively.

Everything points to the fact that the really urgent need of the Jamaican economy, if it is to dig itself out of a deep hole, is to develop massive new export-earning projects with high retention and labour content which will not rely only on the present dried-out sources of foreign-exchange earnings.

a master plan

Such a project can be developed. It is multifaceted. It features transportation by land, rail, sea and air; assembly of manufactured goods; retailing and wholesaling of container supplied goods; Internet technology; hotel accommodation; free port shops and cultural activity based on Jamaican heritage and contemporary culture.

It requires an expansion of the Kingston Container Terminal and Freeport to accommodate mega ships currently being developed for which the Panama Canal is now being widened. Reclamation of 197 acres of land around the Fort Augusta peninsula which, with 54 acres of existing land, would provide a strategic development area of 250 acres next to the container port.

The development would provide more berths, creating additional pier accommodation, including access to the Port Royal archaeological park; it would also include assembly manufacturing; Internet technology; hotel accommodation; a free port area for shopping and a cultural park for cultural presentations. This would be the centrepiece as conceived and proposed by me in May 1996 as the Fort Augusta Freeport Development plan.

Add to this a large reservoir near Spanish Town, larger than the Mona Dam, which I have proposed, storing the overflow of the Rio Cobre to be used to irrigate the 12,000 acres of the St Catherine Plain, representing the remaining agricultural developable land in the parish. This would irrigate and cultivate organic vegetables for export by cargo plane leaving the proposed Vernamfield cargo airport being promoted by Mike Henry.

This master plan would incorporate the developed Norman Manley Airport, and the Tinson Pen Aerodrome for small jets to accommodate passengers from North, South and Central America. It would introduce tourism on a credible basis to Kingston to patronise the development of Port Royal, the best marine archaeological site in the Western Hemisphere, using the berth at the southern end of the reclaimed Fort Augusta development to ferry passengers across the mouth of the harbour to Port Royal.

Many thousands of jobs would be created for the southern side of the island, with the possibility for considerable foreign-exchange earnings. This mega project, subject to studies of the possibility to develop substantial export earnings, could substantially close the balance of payments gap. It would complement the stability of the domestic economy as set out in the IMF agreement with a further agreement to induce stability in the external economy as the link to restoring illusive growth after 20 years. In the 1980s, such a plan was created by the Government of Jamaica and the World Bank.

Edward Seaga is a former prime minister. He is now chancellor of UTech and a distinguished fellow at the UWI. Email feedback to columns@gleanerjm.com and odf@uwimona.edu.jm.


Year Imports Exports Balance of Trade
2000 3,004.30 1,562.80 -1,441.50
2001 3,072.60 1,454.40 -1,618.20
2002 3,179.60 1,309.10 -1,870.50
2003 3,328.24 1,385.60 -1,942.64
2004 3,545.10 1,601.60 -1,943.50
2005 4,245.60 1,664.30 -2,581.30
2006 5,076.99 2,133.62 -2,943.37
2007 6,203.89 2,362.59 -3,841.30
2008 7,546.76 2,743.90 -4,802.90
2009 4,475.60 1,387.70 -3,087.90
2010 4,629.40 1,370.00 -3,259.40
2011 5,923.50 1,662.50 -4,261.00

[Mosiah]

Boss, when will you stop blaming the IMF for our problems and start looking at decades of irresponsible governance by what my friends here refer to as the JLPNP? With the human and natural resources with which our country has been blessed, none of us should be having any discussion about the IMF and Jamaica!

Our various governments -- and in many, many cases our people -- are the ones that you need to focus your criticism towards! The IMF never begged us to come to them!

My goodness, man, in the mid 1990s we had reached the stage where the government of the day proclaimed that we no longer had need of loans from this UN institution. Now, look at us today!

What a hell if Hugo Chavez dies tomorrow!

I agree!

Is the IMF a UN institution?!?

[Sir X]

Ian Boyne, Contributor

The demands had been insistent, persistent and potent: Tell us more about this International Monetary Fund (IMF) deal; tell us what it will entail, what it will demand and, most important, when we will finally have it. The major private-sector organisations had spoken, the talk shows had been dominated with IMF talk, and the market itself had been speaking clearly.

Last Monday, it was time - some would say past due - for the prime minister and the finance minister to speak more definitively about the issues. What they said, while not satisfying all the demands for concrete information, did mollify and appease many, including The Gleaner, which did not send them back in retreat as it had threatened. But the fact of the matter is that we still don't know or have any firm idea of when a deal is likely to be concluded.

Opposition Spokesman Audley Shaw, in his release reacting to the press conference at Jamaica House, said that while "the minister made reference to new taxes, the elimination of tax waivers and a liability management programme", there was no indication of "a time frame for the appropriate consultations with critical stakeholders in the implementation of these initiatives". According to Shaw, "The country was still in the dark about the IMF."

Continued Shaw: "So after a three-day Cabinet retreat, we have not been told the specifics of the prior-action requirements and the timetable for implementation in order to secure a new agreement with the IMF." It was his view that "this apparent state of confusion will continue to fuel uncertainty, leading to more slippage in the exchange rate, rising prices and further decline in the economy as a result of a wait-and-see attitude being taken by investors."

The fact of the matter is, howls and demands for more information aside, the Government cannot say what it itself does not know. The negotiations are still going on. Apparently, there are sticking points. Apparently, the negotiations are tough, with a lot of back and forth. Some things are up in the air. There is genuine uncertainty about some things. Mr Shaw asked for some specific things in his release last Tuesday, which, it seems, that the Government itself does not know at this point. He asked for a list of all the prior actions to be implemented before an agreement is inked. It seems from what I take from Minister Phillips' comments on Monday that up to that point, those prior actions were still subject to negotiations and give-and-take.

Shaw asked for specific information in relation to public-sector wages and a timetable for implementation of tax waivers, the liability management programme, as well as for a "firm time frame for the agreement with the IMF".Well, I don't think either the prime minister or minister of finance knows the answer to that.

The minister of finance gave a specific piece of information which the hungry media have been feeding on all week: The primary surplus is to move from 6.3% - which we won't meet this year anyway - to an even more ambitious 7.5%. This means billions more in new taxes or cuts, or, more likely, both. So, that we know for sure. But we still don't know when these taxes will hit and in what areas.

The fact is, that even without that press conference on Monday, we had reason to know that any new IMF agreement - whenever we finally manage to secure it - would involve more taxes, more expenditure cuts, a public-sector wage freeze, if not a cut, and, generally, more hardships and pain. Peter Phillips might have given us a specific figure to chew on because we were bullying him and the prime minister for specifics, but even without that, we would have known that the adjustment would be hard, swift and painful.

calm public jitters

The Government did the right thing to hold that press conference and to get some powerful people off their backs for a while and to calm public jitters, but we still don't know a lot of critical things. And that is understandable, for these negotiations can't be conducted in public. Government can't leak details to the press while still negotiating. And the IMF would not be giving them permission to reveal its (the IMF's) hand in specific ways before the deal is finalised.

Minister Phillips was careful to say that on the matter of waivers and incentives, there has been a meeting of the minds. And clearly the Government has accepted, too, that the primary surplus has to be increased, for in listening to Peter Phillips many times, it is clear that he is really serious about tackling our debt albatross. And I also picked up from him in that press conference taking a 7.5% primary surplus is a better option than some others that could have been on the table.

There is a far more fundamental issue than when exactly we will sign an IMF deal, as critical as that truly is. Markets, indeed, abhor a vacuum. The far more critical issue is that with or without an IMF agreement, there are some tough, unpalatable decisions which we, as a country, must take. I think we should focus on that, realise how much all of us have at stake, and then unite around some common objectives. We also must not give any opportunity for politicians to exploit this crisis and our suffering for their own political advantage.

If we hold Andrew Holness and Audley Shaw to their own words, there is considerable agreement and consensus between what they see as the way forward and what the Government is saying. There is one very important but overlooked positive in the Jamaican political environment today, and that is that unlike other periods when there were sharp and explosive ideological differences about fundamental economic issues, today there is remarkable political consensus on economic strategy. Now there is a potential downside to that, in that minority voices are shut out of the public space and people like Lloyd D'Aguilar are not given enough voice in mainstream media to express their radical, if unworkable, views.

I have no doubt that Lloyd's views are utopian and impracticable, but they should be given voice. Today, both Andrew Holness and Portia Simpson Miller agree that bitter medicine has to be administered. Both agree that public-sector wages have to be constrained. Andrew Holness knows that public-sector wage increases cannot be entertained. He knows that the debt has to be paid down and that it can't be business as usual where that is concerned. So I don't see him, in has heart of hearts, having a problem with a 7.5% primary surplus.

painful steps

Because, mark you, if you don't increase the primary surplus, you can take other steps which might be equally, if not more, painful. So when people start feeling the pain; when public-sector workers start paying more for pensions, bus fares, food, clothes, medicine, rent, and every striking thing, Andrew can't now say, if I were in charge, there would be no pain. You wouldn't be suffering. Andrew knows - and has preached openly and honestly - that bitter medicine is what Jamaica needs to deal with its economic disease.

The World Bank's Global Economic Prospects Report, just issued last week, has put Jamaica's projected growth rate for this year at the absolute bottom of the league in our region, with even Haiti and Guyana being way ahead of us. The World Bank projects that Haiti will grow by 6%, Guyana by 4.8%, while economic laggard Jamaica will grow (if we are lucky) by a paltry 1%. The prime minister has talked about some big projects to come on stream this year, but those will not be enough to give us the growth and economic traction we need to avoid the fire. There is no alternative to the bitter medicine.

There is no non-IMF path in the sense of a painless path. Any party we put in Jamaica House, any path we take, it will be pain, pain, pain. Get that into your head and make no politician fool you. In fact, both Portia Simpson Miller and Andrew Holness should go on a joint campaign to help Jamaicans understand that there are certain things which we, as a country, must do to survive, let alone grow. Our lenders are wary of us. They won't keep lending us unless we change our ways.

PERSONAL AUSTERITY

Cursing the IMF is one thing, but even if we don't have it, we would be foolhardy to think that populist policies will save us. The PM and Peter Phillips say they are ensuring that the most vulnerable will be protected. Well, we know that because social protection of the vulnerable is now part of the IMF jargon, too, the Government will get that concession. Even the IMF has learned some lessons along the way.

As a country, we will have to adopt VMBS's exemplary 'One Less' campaign. People have to cut back. The working and middle classes will be particularly hard hit. The poorest and most vulnerable will have some social safety net provisions. But the vast majority of working-class people and people in the lower and middle classes will have their living standards savaged. How they will react to the increased taxation and cost-of-living increases will determine what kind of social and industrial climate we will have this year.

The storm clouds are thickening. The showers are coming - no pun intended, for, believe me, no shower party can save us from the bitter medicine we all have to take. Let's stop believing in fantasies. While we continue to clamour for more IMF details and timelines, and while the Government panders to this with press briefings and speeches, we can safely bank on more hardships, more belt-tightening, more cutbacks and more price increases on less income, as our new normal.

Ian Boyne is a veteran journalist. Email feedback to columns@gleanerjm.com and ianboyne1@yahoo.com.

[Mosiah]

Sounds like another uppah Sin Andruh verandah talk. I have been to a couple of them, listening to some of Jamaica's brightest minds. (Don't ask how mi reach in dem crowds, but I did!)

Most of the time, the ideas, to me, are sound and feasible. But it appears politics gets in the way of their implementation.

And we have pussyfooted around so much that when it comes time to implement these projects, we won't have the money to do it. Unless of course we get some major investment or major loan.

[Sir X]

In jamaica its always politrcks,seaga basically said the imf loan isnt worth squat unless we have a master plan , a way to grow our economy, he cites the slashing that will be done under the imf deal to basically service debts , yet no growth to get out under it , no master plan .

So the conclusion to me is the imf loan isnt worth it,we have no master plan instead lip service, the question to me is , if we had implemented the master plan would we need the imf loan ? to me thats where our leaders have failed no backbone to do the obvious.

[Sir X]

Thats why its/was imperative for Phillips to tell Jamaicans what the bitter medicine entails and offer our own( go it on your own ) alternative , it seems they have none , thats why both adm were (jlp) and are (pnp ) afraid to tell John public the details of the medicine, people would ask what is the alternative plan ?

We will reach the point where they propose taxing rain water as in the case of bolivia........our leaders have failed us misreably.

THE IMF WILL SCREW US !

[Assasin]

I am not swayed. I am just showing that government policies dicated what transpired.

[Sir X]

Who is debating that ? I think we all agree succesive governments screwed us royally , or is it as I suspect it all lies on the head of the PNP ?

[Assasin]

We are debating the IMF and the Jamaican government and who is the cause of where we are today. Stop compounding things.

Anyway this is the fact that both are resposnible but one has a less of stellar record on economics and it is obvious for us to see. To say others you are fooling yourself.

[Sir X]

LOL...out of the closet ..should I say check mate...lol..talk for yourself,you cant see without your politrictical glasses can you, now tek whey yuh self.

Explains your deluded rants.

[Assasin]

yeah gwaan skip from the truth and nuh tek responsiblitiy. The PNP have a chance to redeem themselves and a that them need fi do for Jamaica's sake. We need it more than ever.

Leadership is what is demanded, don't blame IMF, World bank or anybody else, take it on their shoulder.