Jamaica Gleaner
Published: Wednesday | December 16, 2009
Home : Commentary
IMF 'negotiation' in name only
Dennie Quill, Contributor

Like two million or so other Jamaicans, I have been thinking about the impending return to the International Monetary Fund (IMF). Our experience of the 1980s left nearly everyone critical of the IMF, more than that, scores of people were badly hurt when structural adjustment robbed them of a livelihood.

Far from being successful, IMF prescriptions have been spectacular failures with many countries reneging on their 'agreements' in the face of damaging conditionality which threatens to push them to the brink. We have come to recognise that conditionality is an integral part of IMF lending.

When rumours surfaced earlier in the year that Jamaica would be seeking an IMF loan, it was flatly denied by Government. Then, rather shamefacedly, the finance minister announced that Jamaica would indeed be returning to the IMF. For several months, we have heard about continuing negotiations with the IMF. I would love to have been a fly on the wall at that first pre-briefing meeting held in Washington, DC, between the IMF staff and the Jamaican team. As I understand it, such a meeting is held for the IMF staff to propose the policy strategies necessary for a country to achieve its programme goals.

Special circumstances

One is not quite sure at which point negotiation begins but, as is expected in a genuine negotiation, one of the bargaining chips has to be the special circumstances of a member country. Jamaica, a country on the edge of itself, experiencing a soaring murder rate, battered by high unemployment and crime, taxed to the hilt, dealing with a national debt that drains most of every dollar earned through export, deserves special consideration. One expects that during these negotiations the parties would be seeking to solve the chronic balance of payment problems without instituting measures that would be destructive of national prosperity and inimical to a peaceful society.

More than 40 countries currently have agreements with the IMF and, according to a Washington-based think tank, the IMF has one set of prescriptions for rich countries and a different one for developing countries. It noted recently that the IMF happily supports fiscal stimulus and expansionary policies in rich countries where there have been massive public spending to stimulate their economies. However, poor developing countries are being forced to cut public-sector spending that can only serve to exacerbate the economic downturn.

The IMF's policy prescription of structural adjustment was widely criticised in the 1990s. This global resentment of the IMF and questions about its relevance and legitimacy forced the organisation to examine itself and declare new policy strategies and new lending guidelines in 2002.

Change in policy framework

But here's what the Third World Network (TWN) says about the new IMF. "The documentation on the IMF's current loan conditionalities and policy advice demonstrate that the traditionally contradictory nature of the IMF's fiscal and monetary policy framework has not changed. The old recipes of tight fiscal policies cut in government spending, and single-digit inflation seem to be at the top of the fund's conditions and advice to countries that it has bailed out."

Let's look at what happened in some countries which recently signed agreements with the IMF. In Pakistan, interest rates shot up and electricity bills went up 24 per cent. Hungary experienced a hike in interest rate and currency devaluation, in Latvia there was a 15 per cent reduction in local government employees' wages, pension freeze, and cut in government spending and an increase in the value added tax. In Belarus, there was devaluation in the currency, and in Serbia, the IMF had to approve public-sector pay increases. Civil society, unions and opposition parties have all been bitterly opposed to cost-cutting measures which hurt the most vulnerable in these societies.

So, is there a negotiation between the Government of Jamaica and the IMF? Or is the IMF imposing its will on the Government? For Mr Golding to suggest that new taxes will be imposed on this country indicates that the Government has no wiggle room and has been collared by the IMF. I cannot think this administration would want to deprive pensioners of their just dues.

But beyond the agreement, what will we achieve? Will there be genuine economic reform after all the expected pain? Is this what it will take for us to recognise that the root of our economic demise is grounded in our inability to produce more?

Dennie Quill is a veteran journalist. Send feedback to columns@gleanerjm.com.

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