IMF deal safe, says Holness - JLP leader vows that growth push will not threaten fiscal programme
Published:Thursday | February 18, 2016 | 12:00 AMGary Spaulding
Leader of the Jamaica Labour Party (JLP) Andrew Holness has emphasised that a Government led by him would not abandon the existing agreement with the International Monetary Fund (IMF).
Underlining his claim that the IMF agreement is being mishandled by the governing People's National Party (PNP), Holness said that his administration would stress a growth agenda without the same missteps of the present Government.
According to Holness, while the wisdom of fiscal discipline cannot be disputed, the PNP got it wrong in its avoidance of, and disregard for, a cohesive and comprehensive economic growth plan.
"To be absolutely clear, and to ensure that I am not misconstrued, Jamaica must honour its obligations, and repayment of the debt must be a priority," Holness told The Sunday Gleaner.
He argued that the IMF has done nothing wrong, and the failure of the PNP administration to achieve economic growth was no fault of the lending agency.
Holness stressed that Jamaicans must be mindful that it was a JLP administration that initiated a deal with the Fund.
PNP'S ERROR
"We had been saying even before the election in 2011 that we would implement some of the IMF programmes, particularly tax reform, to put the IMF programme back on track," said Holness.
The opposition leader charged that the governing party erred when it discontinued the programme that was agreed under the JLP administration.
"Dr Peter Phillips, having taken over in 2012, basically said that he was going to negotiate the best deal with the IMF," said Holness.
"But before that, the prime minister, during the leadership debate, said that within two weeks, the PNP would renegotiate the IMF deal," he noted
Holness noted that the IMF's role is to ensure that Jamaica is able to repay its debt. "The IMF is almost like the central bank of the world, and it's there to prevent financial collapse," he said.
According to Holness, it is understandable that Jamaica is viewed as a country that is unsustainable, with such debt levels.
"So there is no question that we needed to have IMF support," he asserted.
"The question arises, how do you pay down the debt and grow the economy at the same time? Do you pay the debt at the expense of the people, or is there a way to include the people in repaying the debt?"
The JLP leader suggested that the route being pursued by the PNP administration to pay down the debt is wrong. "That is the route chosen by the Government, not the IMF," argued Holness.
He stressed that the IMF is not the dictating overlord that it has been made out to be. "The IMF is viewed this way because it is finally getting the Government to the doorstep of fiscal discipline."
Holness said that it took six months after the PNP assumed office in 2012 to eke out a new deal with the IMF, although the existing one had not ended in 2011 when the JLP was voted out of office.
"The IMF deal had six months to run, and what the Government should have done was to continue under the old programme instead of waiting for six months," he contended.
DOLLAR DEVALUATION
According to Holness, the period of six months created a level of uncertainty in the economy, which is why the exchange rate has shot past the J$120 to US$1 mark.
"We are not saying that there would not have been devaluation, but it would probably be under J$100 to US$1," suggested Holness. "Within those six months, so much happened," he added.
Holness argued that although it is being said that the JLP government did not sit five IMF tests, the economy grew by 1.7 per cent during that period.
"We were able to give the public-sector workers, who we promised, sufficient wage increases. The economy was showing signs of recovery even with the highest oil prices in decades because we had a different plan than the PNP, which is uncertain about growth."
He added: "What they are sure about is to go in your pockets, take out money as taxes and just hand it over to the IMF. You can't keep your economy under a heavy tax burden. That is called contractionary economics."
Added Holness: "There are some who believe that out of that fiscal discipline will come growth, but that is not a certainty, instead of approaching growth in a deliberate way."