[OPINIONS]:::I.M.F. approves Jamaica's stand-by load agreement

No. 68 Friday, March 19, 2010
By Robert Dalley
Former Minister of Finance and Planning, Omar Davies, former financial secretary Ms. Shirley Tindall and the former FINSAC Managing Director have all taken a combined case to the court seeking to have the court halt the proceedings of the FINSAC which is being held in Kingston under the honourable Chairmanship of Justice Boyd Carey.

    This is a most regrettable situation and there is absolutely no need for the FINSAC enquiry to be stopped. In whose interest should the enquiry be stopped for? The Jamaican people are entitled to know exactly what went wrong during the 1990s when the country's financial sector literally collapse in major areas causing many companies such as Mutual Life to go into bankruptcy because of the high interest rate policy that was being employed in the country by then finance minister Dr. Davies. Vastly successful banks such as the Don Crawford led Century National Bank, Eagle Commercial Bank, Workers Bank and Mutual Security Bank all were forced to closed their doors due primarily to a severe liquidity crisis that existed within the banking sector at the time with government interest rates cumulatively hovering around 120 percent during the early 1990s which were put into place by Dr. Davies who was finance minister. On the other hand hundreds of hardworking Jamaican entrepreneurs lost their businesses and other assets due to the high interest rate policy that was in place at that time along with other flawed economic policies that were implemented by that P.N.P. and was having a devastating negative effect on businesses across the country.
    As I pointed out to radio talk show host, Wilmot Perkins, of Perkins-ON-Line fame on February 10, 2010 it is of utmost importance that the FINSAC enquiry continues to be held until its conclusion and let the chips fall as the facts are so to speak. A lot of corruption also took place having to do with the operations of FINSAC while favoured Jamaicans of the P.N.P. had their loans written off under strange circumstances while other debtors to FINSAC just had all their assets confiscated and sold to the Jamaica Redevelopment Company on 30 cents of the dollar from that which was owed.
    On Thursday, February 4, 2010, the International Monetary Fund's (I.M.F.) Executive Board of Directors officially approved Jamaica's application for a US$1.27 Billion stand-by loan agreement spanning a period of 27 months. This I.M.F. loan is specifically intended to assist the country due to the many negative effects springing from the world economic meltdown which started some two years ago and is still affecting Jamaica in many major areas in terms of a reduction of incoming flows of funds from remittances and a down turn in incoming foreign investment. The I.M.F. has now stated that it will immediately be disbursing US$640 million to the Jamaican government. And other loan disbursement sums will be sent to the government however, those sums will only be sent to the country if the Golding administration meets the quarterly I.M.F. reviews which will be evaluated by the I.M.F.'s executive board of directors. The I.M.F. has unambiguously stated that the approval of that stand-by loan agreement is principally to address Jamaica's serious base economic problems, to methodically increase the country's growth sectors and importantly, allow
the country to with stand further external shocks in a firm and secure manner.
    Some commentators, public analysts and per­sons from the People's National Party to include the Opposition Spokesman On Finance, Dr. Omar Davies, had consistently been asking the question, why did the I.M.F. stand by loan agreement take so long to be concluded and approved by the 1.M.F.? Did it have anything to do with any incompetence on the part of the government's negotiating team from the finance ministry and Minister Shaw? A senior I.M.F. official has emphatically stated that why the loan agreement took a very long time to negotiate and conclude had to do with the fact that both the I.M.F. and the government of Jamaica wanted to firmly ensure that a proper, viable and practical I.M.F. agreement was tabulated after looking comprehensively at the major economic problems that are associated with the huge under performance of the Jamaican economy. The official further commented that the I.M.F.loan agreement could not have been taken to the I.M.F.'s executive board for approval before certain stipulations were met by the government as follows:
    The successful implementation of the December Tax Package;
The successful implementation of the a local debt exchange programme;
    And the sale or closure of Air Jamaica. 
   According to the I.M.F.'s Chief of Mission to Jamaica, Mr. Trevor Alleyne, the country's recently implemented debt exchange programme which factually exchanged the equivalent of some US$8 billion was the major step in getting the I.M.F.'s approval and ultimate disbursement of that stand by loan sum of US$1.27 billion. Said Mr. Alleyne, "We also took to heart part of the Government's rationale that the debt exchange should constitute an overall burden sharing that was to be made more equitable, we have been in contact with the authorities (Minister of Finance and Finance Ministry) and they have passed on to us the preliminary results of the debt exchange - we are aware of some of the results and they (Government) are as we had hoped for".
    The I.M.F. in a recently issued statement has categorically stated that the three main segments of the I.M.F. loan to Jamaica are "an ambitious plan that puts public finances on a sustainable path that includes much needed public sector reform; a debt strategy to, lower exceptionally high interest costs and help address the problem of the debt overhang and raise the productivity of public spending; and financial sector regulatory reform to reduce systemic risks". It is germane to note here that the I.M.F. has quite recently stated that the Jamaican government, have commenced implementing policies that is supposed to timely improve the public sector fiscal balance by 5 percent of Gross Domestic Product (G.D.P.) within the financial year 2010. The government's debt exchange programme will generate inter­est savings of at the very least three percent of G.D.P. and concomitantly, a 65 percent reduction in the amount of maturing government debt specifically over the next three years have been successfully achieved, with some 98 percent of lo­cal bond holders signing on to the debt exchange programme. With regards to the successful implementation of the debt exchange programme, the hardworking, fearless and fully committed finance minister made the following public statement which all Jamaicans should take precise note of "This is a historic and game-changing time in Jamaica's history and the Government of Jamaica is deeply grateful to the financial community for its overwhelming response to the Jamaica Debt Exchange (J.D.X.). The J.D.X. was a major prior action required for the favourable consideration of our application to the I.M.F.".
-Continues Next Issue