By Andrew Green, Staff ReporterTHERE WILL be no International Monetary Fund (IMF) certification for Jamaica's economic programme.
This was revealed by Prime Minister P.J. Patterson at a Jamaica House post-Cabinet press briefing on March 1. He was discussing the IMF assistance which will replace the Staff Monitored Programme (SMP) discontinued by the IMF in February last year. The IMF maintains 'Article Four consultations' on the economic condition of its member countries, including Jamaica.
"We envision that the Fund will continue its regular Article Four consultations but that this would be enhanced with quarterly monitoring of the announced financial targets," the Prime Minister said. "These reports, unlike those of the SMP, will make it clear that the economic and fiscal objectives will be those of the Government of Jamaica, and certainly not those of the IMF."
Finance and Planning Minister, Dr. Omar Davies, has been holding talks with the IMF for about a year, in an attempt to come to an agreement on the method of monitoring Jamaica's macroeconomic performance.
Such monitoring has presented a major difficulty for the IMF.
"The IMF's interactions with member countries can have an important signalling function," its Executive Board said in a January statement last year. The Board said it was decided to terminate the SMP programmes because they risk being misinterpreted as carrying the Fund's seal of approval. The SMP programmes were ended because, "relatively lax standards for reporting on performance have allowed members to use the positive signal of initiating an SMP without adequate follow-up on implementation," the IMF said. Jamaica had a "bad history" with its SMP programmes, particularly over their final two years, said economist, Dr. Omri Evans. Key targets were missed by large margins.
A key signal of IMF intentions was its suggestion that the Government use the opportunity for the Article Four discussions that were scheduled for May, to reach a final understanding of the details of the monitoring mechanism, said Dr. Evans. By that time, the Budget for 2004/05 would already be in place, and the IMF would also avoid being linked with it.
"Under the new programme, which is now being given favourable consideration by the Fund, we will continue to set quarterly targets agreed with the IMF," Prime Minister Patterson said in a national broadcast on Sunday. "The proposal for the new arrangement is to have the Board of Directors of the Fund carry out the monitoring, thus giving it the IMF's endorsement."
A SIGNALLING MECHANISM
Prime Minister Patterson's view was that, "The transparency and accountability that will be established in this new relationship will serve as a signalling mechanism for the domestic and international capital markets."
The Board of Directors of the IMF will evaluate the benefits and perceived risks that are involved in investing in the Jamaican economy, Mr. Patterson said. "With positive performance, this mechanism is expected to contribute to the improvement of our international credit rating and a reduction of the cost of borrowing in the external market place."
The procedure will be similar to a programme that currently exists between the IMF and Lebanon, Mr. Patterson said at the post-Cabinet press briefing.
But the 'programme' which exists between between Lebanon and the IMF was described as a "policy dialogue" by IMF deputy managing director Agustin Carstens, during a December visit to that country. He told the Lebanese authorities, "The IMF stands ready to build on this relationship with Lebanon as a trusted adviser, and as a provider of technical assistance in the areas of IMF expertise." Jamaica urgently needs access to low-cost medium to long-term financing to improve the management of its debt burden, Dr. Evans said.
That option has been closed by the lack of credibility of its economic policies. Without an "IMF stamped agreement," Dr. Evans said, "I don't think perceptions of Jamaica will change in the international capital markets."
No response was available from the Ministry of Finance on its IMF negotiations.
