- 2010: Stand-By Arrangement, US$1.25 billion
- 2013: Extended Fund Facility, US$932.3 million
- 2016: Stand-By Arrangement, US$1.7 billion
The stand-by agreement, announced Thursday, would make $430 million available immediately after the IMF board approves it next month. It replaces a four-year IMF loan that Jamaica took on after it restructured debt in 2013.
Andrew Holness said: “Our request to move to a precautionary arrangement is a sign of strength and reflects the policy credibility and strong macroeconomic management of the Jamaican government,”
“Jamaica has made commendable progress in its economic adjustment program over the past three and a half years,” said Alejandro Werner, IMF’s director for the Western Hemisphere. “Macroeconomic stability is becoming entrenched as evidenced by low inflation, the buildup of foreign currency reserves, and a decline in the current account deficit.”
-----------The 2013 IMF agreement was an extremely strict IMF agreement where the Government was drip fed small amount of money only after performing certain task and jumping hurdles. The payment was 20 to 30 Million US$ at a time. It was that strict because the previous Government had borrowed 1.2 Billion, got US$850 million up front and broke every agreed upon terms. In 2012 because of that, Jamaica was locked out of the international financial markets and downgraded by all credit companies.
The last PNP Government followed the agreed upon 2013 terms, remained discipline and in so doing restored international confidence in Jamaica. The last Government return Jamaica’s financial books in proper working order.
- Inflation: 3.7% lowest in 50 years, down from 6.0% in 2011
- GDP Growth while small was always in the positive
- Debt to GDP Ratio was reduced to 126% of GDP down from 150% of GDP in 2011
- Jamaica Stock Market makes record in 2015
- Jamaica moved up 5 places in the 2015 Forbes Best Countries for Business Report
- Net International Reserve (NIR) US$2.44 billion, above target US$1.64 billion and stable
- Primary Surplus of $55.8 billion, above target of $50.5 billion
- International Rating Agency upgraded Jamaica’s Credit ratings over the years, Moody’s, S&P and Fitch all upgraded Jamaica.
Thus setting the stage for the 2016 IMF agreement
For the most part IMF Austerity did what any Austerity was design to do put our financial books are in a much better shape which gave this JLP Government the much needed wiggle room. Austerity did not produced the much need growth, growth at best was marginal and mediocre but positive.
But Austerity was never design for growth but a period of sacrifices design to reverse the many decades of irresponsible fiscal and economic policies we the Jamaican people allowed. That said we cannot and should not undermine the positive effects because I believe our previous financial status set the stage for this Government to do some good.
So How will the 2016 IMF Agreement be Implemented?
How this IMF agreement turn out in a couple years will depend on how the Government approach its implementation. In 2010 the JLP Government governed by popular demand especially after the Dudus invasion. They governed on a feel good, matrix like platform. Give the people what they want!
But what the people want is not always what is best for the people or in the interest of the people and nation building. Most of the time not bending to public pressure and giving the people what they want is the best thing to do. Yes it will make you unpopular with the people but this is not a popularity contest this is about nation building. In 2010 pumping all that money into the foreign exchange undermined local production as the people substituted local products for imported ones.
The people do not give a damn about growth, yes they pay lip service to it but deep down that is just some shit they say. The people want the ability to import consumer luxury goods cheaply, cell phones, weave, cars henny, pancake mix to name a few and to hell with local products and local producers and farmers. Jamaican will import onion and red peas by the tonne.
The Foreign Exchange Rates:
I suspect the exchange rate will start to reduce once the money from for this IMF agreement starts to flow into the market. I suspect Shaw pushed for an agreement that would allow him the freedom to pump money into the foreign exchange market.
At what point did the foreign exchange rate became the only economic indicator and the only measure of success or failure?
The only reason why the exchange rate is of such paramount importance is because of our import culture. Our need to import useless consumer goods most of which goes in one end and come out the other as brown stuff. We have a knack for importing things we already produce thus kicking away the legs from under local producers. The inflation rate is stable, the unemployment rate is holding, the goods production sector increased over last year, GDP is in the plus even if it is marginal and mediocre and many more indicators are stable or moving into positive territory and all this while the dollar is devalued. Yes we are still not where we want to be but we are not declining or declining at any fast rate.