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GOLDING SAYS IMF DEAL A ‘FLEETING ILLUSION’
BY BALFORD HENRY Observer senior reporter balfordh@jamaicaobserver.com 
Sunday, October 27, 2013 
Bruce Golding

FORMER Prime Minister Bruce Golding has said that while conditions imposed under the current Extended Fund Facility (EFF) agreement with the International Monetary Fund (IMF) are necessary, they will not promote investments and growth.

"Put another way, the conditions which the IMF imposes, left by themselves, will be impediments to investment and growth," Golding told an audience, including Jamaicans, at last Tuesday's CIN Lecture Series 2013 at the Schomburg Centre for Research in Black Culture in New York City.

"When a country's expenditure is so constricted that it can't effectively tackle crime and violence, cannot maintain an improved infrastructure, cannot develop a workforce with the necessary education and competencies, the conditions that need to exist for investment and job creation and growth to take place will remain, to borrow Emperor Haile Selassie's term, 'a fleeting illusion'," he said in a wide-ranging commentary on Jamaica's economic performance over the past 20 years.

Golding addressed missteps and missed opportunities over the period, as well as his assessment of what is necessary to overcome the challenges. He also took time out to explain that he was not criticising the Government or Finance Minister Peter Phillips for reaching an agreement with the Fund on the EFF, but didn't think it was enough to encourage growth.

He said that the "huge sigh of relief" which greeted the signing of the agreement in May, and which echoed across the international financial landscape, was exaggerated.

"I want to caution against the belief held by many, and articulated by the multilateral agencies. This argument goes like this: That if you stick to your guns and you are able to meet all the commitments that are stipulated under the IMF programme, we will finally, for the first time at last, be on the road to economic recovery and sustained growth," Golding stated.

He said that it is also being contended that the IMF policy of fiscal consolidation, which requires the cutting back of expenditure, while increasing revenue collection and reducing external debt, will ensure economic growth in the medium to long term.

Therefore, he said, the Government has committed to achieve and maintain a primary surplus of 7.5 per cent, starting immediately, to eliminate the fiscal deficit in two years, and to reduce the debt-to-GDP ratio from 140 per cent to 96 per cent in six years.

He said that the difficulty he has with that construct is that it has inherent contradictions that, while they cannot be eliminated, have to be countered if the programme is to succeed. However, the constraints imposed by these restrictions will impede investment and growth.

"I am not making this as a criticism of the Government, because the Government has very little room in which to wiggle, nor am I making this as a criticism of the IMF," Golding stated. However, he pointed out that, based on its mandate, the IMF is primarily concerned with financial stability.

"The IMF is primarily concerned with our ability to pay our external bills, and to repay our external debt, so that the smooth functioning of the global financial and trading system is not disturbed: That is its mandate, that is its mission," Golding pointed out.

"Economic growth, especially in the case of countries like Jamaica... is not the IMF's overriding priority. That it leaves to us to look about," he added.

"I am not saying that the commitments should not have been made, I just want you to understand the implications of the commitments. So, the conditions set out in the IMF agreement are necessary, and you will never hear me raising any criticism of Dr Peter Phillips or the Government for having entered into an agreement with those stated commitments. What I am trying to say is that they are necessary but are not sufficient," he said.

"While they speak to the conditions necessary to allow growth to take place, they do not embody the proactive steps that are required to make that growth occur," he concluded.
He said that the challenge now facing Jamaica is not just to pass the IMF tests, but to generate growth while pursuing a constricted, growth-passive fiscal policy.

"We have to go beyond the IMF agreement. We have to be not just IMF-compliant, we have to be IMF-plus," he said.

The annual debate was hosted by the CIN Network, which provides coverage of Caribbean culture for Caribbean-Americans living in the tri-state area of New York, New Jersey and Connecticut.

 
 
 
   

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