Now that we have the IMF pact...

Source: Jamaica Observer

Wednesday, February 10, 2010

When it concluded an agreement with the International Monetary Fund (IMF) and a deal with holders of government debt, the Bruce Golding administration fundamentally changed Jamaica's economic policy of the last 25 years.

While not discounting the devastating impact of the global financial crisis on key sectors, such as bauxite and remittances, poor macroeconomic policy and equally poor economic management are largely responsible for our low growth and high government debt.

The antecedents of the economic crisis date back in some instances to the 1970s. Borrowing to finance growth, a failed policy, was started during the oil crisis of the 1970s, enlarged by Mr Edward Seaga in the 1980s and was a tenet of policy during the regime of Dr Omar Davies. It reached a point where it was not sustainable.

Not having a borrowing relationship with the IMF was held up as asserting sovereignty and demonstrating our capacity to manage our own affairs. Messrs Michael Manley, Seaga and PJ Patterson terminated the use of IMF loan facilities which involved measures which any prudent government should implement without being compelled.

The tectonic shift in economic policy has occurred under duress, but the fact that it took six months longer to conclude the negotiations with the IMF is a serious indication of the very weak technical capacity of the Government to formulate and execute economic policy.

With regard to economic management, it cannot be business as usual. The Government's economic management capacity must immediately be considerably upgraded.

A start has been made, but a great deal is left to be done. Where there was no capacity some has been installed, eg, the Ministry of Finance, and where there was high interest rate fundamentalism, pragmatic leadership has been imported, eg, the Bank of Jamaica.

The Planning Institute of Jamaica (PIOJ) needs a new head and this time round we must break with the pedestrian. The new director-general must be a high-calibre economist who must have the courage to say what needs to be said and not what the political leadership wants to hear. He/she must transform the PIOJ into the think tank that it has not been since the days of Mr Don Mills and Mr Gladstone Bonnick.

A financial controller needs to be appointed in the Ministry of Finance to ensure that the IMF targets are met, as well as the fiscal management which evaded Mr Don Wehby. This person must have the responsibility of co-ordinating the inflows from multilateral financial institutions, in particular, the World Bank, Inter-American Development Bank and the European Union.

A weekly status report must be provided to the finance minister and the prime minister. The person does not have to come from the public sector. Skilled people from the private sector should be considered. They must have the right attitude, maturity and leadership qualities. They must approach working in Government with recognition that while there is no embarrassment of riches, there are dedicated, hard-working, patriotic and competent civil servants.

New thinking is required if Jamaica is to emerge from the economic crisis, and we should not be afraid to look for fresh ideas from abroad. There are several world-renowned Jamaican economists living and working outside Jamaica. Ironically, their advice is sought all over the world except in Jamaica. But essentially, the Government should avail itself of the advice of any expertise regardless of nationality.