KINGSTON, Jamaica, Observer – THE anticipated approval of the IMF deal by their executive board, announced on Monday, will give Jamaica some welcome breathing space but it is absolutely no panacea to our deep-rooted economic problems. In this context, the call of the three private sector leaders of the JCC, JMA and PSOJ that it “cannot be business as usual” is absolutely correct, even understated.
In even the most badly constructed IMF programme (on which I am not yet expressing an opinion as the full details are not yet available), it is normally possible to pass the first two to three quarterly IMF tests, which would bring us into next year. So it is very likely that Jamaica can muddle along for the next few quarters, even if the economy continues to decline, as is very possible.
However, it should first be noted that the full impact of the tax measures announced in February have not been felt yet. In an economy already seeing negative growth for the last calendar year, with the decline accelerating in the second half of last year after the last increase in taxation in May (not a coincidence), even before the collapse of confidence seen in the first quarter of this year, the economic situation can only be negative. In addition, over the last few weeks before the IMF announcement there was almost a palpable loss of confidence amongst Jamaicans of all kinds, accelerating a run on the dollar. Jamaicans essentially got a small taste of what life might be like for a country that is severely deficient in terms of its foreign exchange earnings, with a current account deficit consistently above 10 per cent, which no longer has access to the international bond market or the financial support of the major multilaterals.
