Sunday, October 16, 2016

Jamaica 2016 IMF Stand-By Arrangement

  • 2010: Stand-By Arrangement,  US$1.25 billion
  • 2013: Extended Fund Facility,  US$932.3 million
  • 2016: Stand-By Arrangement, US$1.64 billion
Jamaica and the International Monetary Fund reached an agreement to make $1.64 billion in funding available over the next three years as the government seeks to further cut one of the world’s highest debt loads while jump-starting a sluggish economy.

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.

Government Thanked Opposition Good Economy
First The Finance Minister Audley Shaw thanked the last Government for inheriting a stable economy that allows the current growth numbers… and now the Mr. Growth Council himself Michael Lee-Chin does the same. It is hard to ignore facts.

..."Chairman of the Economic Growth Council Michael Lee Chin has acknowledged the efforts of the previous Government in putting Jamaica on a path for growth. In fact, the esteemed businessman has said that he is confident Jamaica can achieve growth." ....

"KINGSTON, Jamaica - Chairman of the Economic Growth Council Michael Lee Chin has acknowledged the efforts of the previous Government in putting Jamaica on a path for growth." .......

What I will never ever like about politics is that to win an election the opposition must convince the people that they are heading in the wrong direction, even if they are heading in the right direction. They must convince you out of selfishness that we are heading over a cliff and we are all going to die. That is the behavioural dynamics between Government and opposition regardless of which party makes up the Government and Opposition.

Diehards for the PNP Opposition must give the JLP party in Power some credit and some respect for breaking with the tradition of blame, blame and blame even after they achieved their objectives of becoming the Government. The facts were before them and they saw that and said it like it is. This is not an adversarial position but an invitation to work together. Oppositions in general. need to stop acting like the typical crab in a barrel opposition and realize when it is time to get on board and build this nation. One can still oppose bad ideas and actions without using the scorched earth policy. destroy all before you, so you can win.

"MINISTER of Finance and the Public Service Mr Audley Shaw did something we don’t see too often in Jamaica when he gave credit to his predecessor, Dr Peter Phillips for laying the basis for the economic progress the country is making.

In Parliament on Tuesday, Mr Shaw was not shy in saying very plainly: “I have inherited good news from the former minister, and we are continuing with the good news in the present Administration. We have stuck with the IMF (International Monetary Fund) programme, we have fiscal containment...”
" .........

This is not something most diehards for the JLP party in power wants to admit and I am sure they wish the Government would shut up and stop giving any credit to the PNP opposition when they were the Government. But statistical facts are their for all to see if they want to see it. Diehards and facts do not go together. The JLP Government inherited a better foundation and are in a better position to improve on that foundation. The JLP Government is reaping the benefits of hard work, discipline and dedication that went into turning our Economic ship around.

No comments:

Post a Comment