The rate ticks away: J$96, J$97, J$98, J$99 to one. On Thursday, the Jamaica dollar was at J$99.48 to the greenback, and heading fast towards J$100–one J$ for just one US cent.The Jamaica dollar has lost 12 per cent of its value in the past 12 months–and four per cent of this since an outline deal with the IMF was announced on Ash Wednesday.
Lent has now passed, and the Easter bunny too–but the IMF kite is not yet flying smoothly. An end-March target date for a firm agreement has slipped. Worse, no day seems set to take proposals to the IMF Board. Confidence is sliding.Jamaica's finance minister Peter Phillips presented an annual budget last Thursday. That was probably no fun for him–or his audience.
Planned spending on national security is down by four per cent. The police training budget is cut. Education spending is slashed by five per cent. And with inflation running at nine per cent, those reduced cash allocations will carry less bang for each buck.
The good news is that with February's "debt exchange" haircut for domestic lenders, the big saving is in debt service costs. These are down by more than 30 per cent, with many repayments shelved for the next three years. Even so, 43 per cent of government spending will disappear into this big black hole.
China will lend US$300 million–equivalent to 20 per cent of this year's capital budget, but spread over a longer period–for a Major Infrastructure Development Programme. Much of this cash will be used for small-scale "community projects," some suggested by members of parliament to help their own voters.
Mainstream business is under pressure. "I am ready to pack up and head to Trinidad and apply for membership of the Trinidad Manufacturers' Association," says Omar Azan, past president of the Jamaica Manufacturers' Association.Those are strong words. He has already seen tough times. He started his Boss Furniture in 1990, fresh from business school in Florida. Loan interest was 68 per cent.
"Some days I wanted to hand the bank the keys," he says. He kept going. Azan now has four factories and a polyurethane foam plant, employs 225 staff, and exports as far as Suriname.His frustrations? Head of the list are energy costs five to six times T&T's; government red tape; and interest rates still ranging up to 17 per cent. Port charges jumped last month by more than 550 per cent, with a cost structure which he says discriminates against exporters.
A year ago he could get US$100,000 from the bank with no trouble to pay overseas suppliers. Now, the banks are rationing US dollars. He buys where he can, when he can, from banks, cambios, or under the counter.Not everyone frets about forex. "I'm not worried if the currency slides," say a Kingston banker. "We just need to get it over as fast as possible. We should let market forces set the rate. Dragging out the process encourages people to profiteer by hoarding US cash."
One-third of Jamaican households live wholly or partly on US$ remittances from family members in the likes of New York or Miami. When the J$ slides, those MoneyGram or Western Union transfers stretch a little further.Tourism, too, can benefit. Hotels charge their visitors in US dollars, but most of their costs are paid in Jamaica dollars: wages, utilities and taxes.
Manufacturers and farmers are in trouble when they sell to the local market, as most do. Imported inputs cost more, but they can't raise prices to suit because their customers don't have the cash. Exporters do well, but how many are there, in today's Jamaica? Not many.
Workers on a fixed salary are hit when a depreciating currency pushes up the price of imported goods. So are the retailers who sell to middle-class customers–a powerful and vocal lobby.
Tight wage restraint is a precondition of the IMF deal. Inflation makes it harder to negotiate–and harder to hold once agreed. Most public servants signed up for a salary freeze in March. But no deal has been finalised with teachers, nurses or police. On budget day, hospital doctors started a sickout over pay.
There is more pain. Revenue raisers agreed before the budget kicked in from April 1. Property tax rates were increased by 150 per cent. On top of this, a revaluation exercise will push up the base value on which the tax is calculated. Some expect a jump from around US$100 to US$500 a year in middle-class Kingston districts such as Meadowbrook, perhaps five times as much in upscale suburbs.
Before the annual budget, the governor-general, Sir Patrick Allen, opened parliament with his Throne Speech, written for him by the government. Last year, he promised anti-gang legislation, a comprehensive national-security policy, and a powerful anti-corruption body. A year later, these are not in place.If Omar Azan does catch the next flight to Piarco, he will find his light bill lower. But some other worries may look strangely familiar.