KINGSTON, Jamaica – Fourteen years after the nation ended its borrowing relationship with the International Monetary Fund, the Jamaican Government has admitted it has no choice but to return to the multilateral lending agency.
In a statement to Parliament yesterday, Minister of Finance and the Public Service Audley Shaw said Cabinet on Monday gave approval for a re-engagement with the fund.
“Cabinet yesterday authorised me to make a formal application to the IMF to seek to borrow up to 300 per cent of quota (approximately US$1.2 billion) in the standby agreement,” Shaw told Parliament.
“We expect to complete the preparatory work and documentation by mid-August and to make a formal submission to the executive board of the IMF when it resumes in September.”
Then Prime Minister P.J. Patterson, during a People’s National Party annual conference in September 1995, bid ‘goodbye’ to the international lending agency which the country first approached for budgetary support in the 1970s.
“Goodbye, ta-ta, au revoir,” Patterson said to thousands of cheering PNP supporters.
The nation’s relationship with the IMF became tense in the late 1970s and 1980s as a result of strict conditionalities such as a public-sector wage freeze, increase in interest rates and other belt-tightening measures.
Yesterday, stone-faced parliamentarians sat inside Gordon House and listened attentively as Shaw outlined the rationale for and process of Jamaica’s return to the fund.
The finance minister, saying the country was facing tough times, pointed to a fallout in foreign-exchange earnings and capitalflows; a scarcity of loan funds on the international capital market; as well as “the prospect of a severe contraction in the local economy beyond the present crisis”, as he painted a picture of Jamaica being caught between a rock and a hard place.
“Jamaica has no real option at this time but to return to a borrowing relationship with the IMF,” Shaw said.
The nation faces a balance of payment gap of US$600 million – US$800 million this fiscal year, meaning the country would barely be able to pay for its imports.
The economy has been crumbling under the weight of the global economic meltdown, with the finance ministry stating that the country will lose approximately US$1.3 billion in revenue this year as a result of a fallout in bauxite, remittances, tourism and other sectors.