Managing Jamaica’s economy

As the year turned and Prime Minister Portia Simpson-Miller addressed the people of Jamaica, their main concerns seem to have been to hear from her some indication of when, and on what basis, the now prolonged discussions with the International Monetary Fund (IMF) would be concluded. But this was not to be, and the government’s negotiations, led by Minister of Finance Peter Phillips, continue. Hopes had subsequently been raised that following a retreat into the weekend, some indication would be given that the Jamaican cabinet would have arrived at a definitive response the Fund’s representatives in Jamaica, but this too, seems not to be the case.

To the Jamaican people this would seem to be a continuing saga since Jamaica first confronted the IMF in Michael Manley’s second term during the 1970. The substantial fear of the population – business persons, companies and ordinary folk alike – has been the almost persistent decline in the economy as reflected in the continued devaluation of the currency since the days, in the early 1970s, when a United States dollar was worth approximately 89 Jamaican cents. Today one United States dollar is worth approximately 98 Jamaican dollars, in a context in which the government seems to be unable to stop the slide of the floating currency.

The current negotiations with the IMF are actually a hangover from the those initiated by the government of the Jamaica Labour Party led by Andrew Holness, which was defeated on the basis of a combination of issues, the main ones being the government’s loss of credibility over the so-called Dudus affair, which led the government to resist a United States request for extradition, and the continuing failure to come to agreement with the IMF.

The crux of the matter is, of course, the country’s high external debt, a phenomenon now not unfamiliar to other Caricom states, which leads to a situation of minimal resources left for domestic investment.  The current debt is J$1.7 trillion which is 128% of the gross domestic product. And debt servicing is now equivalent to half planned government expenditure for the 2012-13 period. In addition debt repayment and public sector wages amount to 78% of total planned expenditure.

The result is, as one commentary has recently put it, that “this leaves just 22% to equip and operate the security forces, schools, hospitals, to provide some food and the barest necessities for the poorest among us and to give unattached youth a reason to believe in the future.”

It seems to have been assumed by the Jamaican voters that a return to office by the People’s National Party led by Portia Simpson-Miller, following the Dudus debacle, would clear away external doubts about the Jamaican government’s ability to decisively come to decisions and make them stick. But with the prolonged negotiations now in train, doubts have arisen as to whether the new government is really any different from the old.

These doubts have been indicated particularly in the responses of the Jamaican private sector to Portia Simpson-Miller’s New Year address in which she failed, in their view, to either indicate a clear path to a resolution of the remaining issues with the IMF, or provide a view on policies, in particular, to facilitate private sector development, that the business class seems to have been awaiting. In that context, the Chairman of the Private Sector Organisation of Jamaica (PSOJ) raised the issue of whether the government can sufficiently “think outside the box” in a context in which the country needs “a whole new paradigm if we are to move the economy forward.”

The political atmosphere at the beginning of 2013 is, in some measure, in sharp contrast to that at the beginning of 2012. Then, a certain optimism prevailed with the re-election of the PNP, allowing the Jamaican people to have a sense of the relief from the prolonged dragging of the country’s name through the mud as a consequence of the Dudus stand-off with the United States that led then Prime Minister Bruce Golding to stand down, and his successor to call elections at a time obviously not of his own choosing.

Portia Simpson-Miller’s victory came to virtually coincide with the Jamaican victories at the Olympics, when the country’s capacity for innovation in both sport and cultural activities was showcased to the world. But in the course of 2012, and into this new year, in spite of heartening celebrations honouring the careers of two long-standing political stalwarts – Edward  Seaga and P J Patterson – that demonstrated the country’s capacity for domestic political consensus, the fact of the matter is that efforts to find a middle ground on economic policy with bipartisan support, have not come to fruition.

The result is a certain pessimism, as we have indicated, about the country’s economic prospects in particular. In that context, we can only surmise whether the government will have much time to commit itself to activities like the reorganization of Caricom, an effort which can hardly be sustained without an extensive Jamaican interest.

In addition, as the Jamaican government surveys the scene around it, it will be left to contemplate whether external events will be of a kind to give the country’s economy a real lift. That the United States economy would appear to be beginning some degree of regeneration may provide some comfort for a country in which tourism is a major contributor to external income. But on the other hand, as an adherent to PetroCaribe, the government must have already begun to contemplate the consequences of the possible demise of President Chávez, in a situation in which the Venezuelan opposition has raised doubts about continuing support for this decisive economic instrument for some Caricom countries, including Jamaica.

The Prime Minister has promised to indicate conclusions from the cabinet’s retreat early this week. All classes will be waiting with baited breath.

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