You are here
Jamaica to outline concerns in Letter of Intent to IMF
KINGSTON—Jamaica is now discussing the contents of a draft Letter of Intent for a new Standby Agreement (SBA) with the International Monetary Fund (IMF), Finance Minister Dr Peter Phillips has announced. He told legislators on Tuesday that the contents include the virtual elimination of the fiscal deficit by 2015/16 and bringing the ratio of debt to gross domestic product (GDP) down to 100 per cent.
Phillips, who met with an IMF delegation that ended a visit here earlier this month, said that letter would also include progammes and polices that would reduce the ratio of wages to GDP of central government to no more than nine per cent by 2015/16 as well as a programme and timetable for pension reform.
Phillips said the Report of the Parliamentary Committee which outlined the proposals agreed to should be laid in the House very shortly and that “important structural benchmarks for tax reform, including improvement to Tax Administration, and the legislative framework regarding tax reform have also been settled”.
He said that the White Paper setting out the government’s comprehensive policy stance on tax reform has been considered by Cabinet and further work is being done prior to it being tabled in parliament in November.
Phillips said that changes in policies and procedures that improve the environment for doing business and enhance the potential for faster economic growth by improving the competitiveness of Jamaican businesses as well as the preservation of expenditure on social spending and improvements in the delivery and effectiveness of these programmes, will also be included in the letter to the Washington-based financial institution.
The former government resumed a borrowing relationship with the IMF in 2010 but was unable to meet several of the targets under the SBA and in July this year, Phillips indicated that the Portia Simpson Miller government intended to renegotiate the US$1.47 billion agreement with the IMF which expired in May.
But the main opposition Jamaica Labour Party (JLP) has already called on the government to lay on the table all the details regarding the discussions to the public so confidence can be increased. Former finance, Audley Shaw, said that Phillips’ statement indicates he is backing off a December deadline for an agreement with the IMF.
“The minister in the House of Representatives ... in fact backed away, for the first time, from a December deadline,” Shaw told a local newspaper,adding “he never even mentioned the month of December:
In fact, he mentioned no month at all. “When I challenged him on the consequences of making contradictory statements, in which the prime minister says one thing and he says another and that this is destructive to confidence building in the economy, he totally backed away from that position.
“Now, what the country faces is that we don’t know when an IMF agreement will come and I feel pretty certain that, on the basis of the trajectory that is there, where the tax reform white paper and the pension reform white paper will not come until November, I am now pretty certain that no December IMF agreement is on the cards, and the minister knows that and that is why he has backed away from his December target,” Shaw said.
Phillips told parliament that the IMF has broadly accepted the medium term programme which will underpin any deal and that there are no “areas of fundamental disagreement” between the IMF and the government. But he acknowledged that “some important technical issues which remain to be finalized.
“The primary issue centres upon the shared view that given the generally precarious conditions within the world economy and the risks that this negative outlook entails for indebted and vulnerable economies such as ours, there is a need for us to construct buffers for such eventualities.
“Discussions regarding such buffers continue and we are exploring issues regarding the possibility, for example, of additional debt initiatives such as debt for assets swaps with public sector bondholders and debt for nature swaps.” Phillips said that despite constraints the government would continue with plans to grow the local economy adding “it must be understood that the central objective of this programme is to create the conditions for faster, more sustainable growth”.
“Our approach is strategic, our programmes are sound and our prospects are bright. There is work to be done. But we are in a position to move forward in confidence. I see us as being on the cusp of an IMF agreement that will bolster that confidence.
“We will have as a Parliament, as a Government, as a people, to make sure that when an agreement has been signed, we, all of us and all Jamaica, keep to the commitments which we make,” Phillips said, noting that the “exchange rate movement has also been a reflection of the uncertainty that some people have expressed about the timing of a programme with the IMF.
“It is a very difficult time, but we all have to exercise some patience as there are processes that we have to go through,” he said, asking “for patience and responsible action from our citizens as we tie up the last elements of our negotiations with the IMF. “We need the support of every sector, every organization, and every individual as we go forward.
I do not expect that everyone will be happy with every aspect of the programme. What I ask for is an understanding that, as a government, we have been seeking and will continue to seek the best possible agreement with the Fund; one that embodies a consistent set of policies that will lead to long term stability and growth,” Phillips told legislators.
User comments posted on this website are the sole views and opinions of the comment writer and are not representative of Guardian Media Limited or its staff. Guardian Media Limited accepts no liability and will not be held accountable for user comments.
Please help us keep out site clean from inappropriate comments by using the flag option.
Guardian Media Limited reserves the right to remove, to edit or to censor any comments. Any content which is considered unsuitable, unlawful or offensive, includes personal details, advertises or promotes products, services or websites or repeats previous comments will be removed.