Caribbean & Central America - May 2011 (ISSN 1741-4458)

In April, the Jamaican government presented its 2011/12 budget, which was largely dictated by the fiscal-tightening demands of the current IMF programme.  At the beginning of May, a paper published by the Washington-based Center for Economic and Policy Research (CEPR) was strongly critical of the pro-cyclical nature of the IMF programme.

Opening the parliamentary debate on the budget on 28 April, Minister of Finance and Public Service Audley Shaw presented a budget that represented a 9.5% increase over 2010/11 at J$544.7bn (US$6.43bn), but with a projected 10.2% growth in tax revenues.  He admitted, however, that Jamaica has rarely been able to meet targeted tax revenues.  A freeze on public-sector pay was imposed on 1 April 2009 and is intended to remain in force until 31 March 2012.  Talks with public-sector leaders are to be held, in consultation with the IMF, on the length of the freeze and on how to treat arrears of agreed (and legally binding) pay increases that were frozen.

The CEPR paper, Jamaica: Macroeconomic Policy, Debt and the IMF, is strongly critical of the impositions of the IMF.  Jamaica is one of the world’s most highly indebted countries, with public debt at 129% of GDP in 2009/10 and interest on this debt accounting for 17% of GDP.

The CEPR argues that the “pro-cyclical macroeconomic policies implemented under the auspices of the IMF have...damaged Jamaica’s recent and current economic prospects”.  The main problem, according to the CEPR report, is that the huge debt burden has crowded out other public expenditure, particularly on education and infrastructure.  This lack of investment has been a major contributor to very weak GDP growth over the past two decades, averaging just 0.7% per annum.

Now, warns the CEPR, the current pro-cyclical IMF programme, with its demands for tax increases, expenditure cuts, and the containment of the public-sector wage bill, “threatens Jamaica’s prospects for recovery and risks exacerbating its public debt problems”.  The report concludes: “In the absence of plans to tackle Jamaica’s debt problems with a broader concern for the growth and employment needs of the economy, Jamaica’s economy will continue to stagnate.”

On a more positive note, Jamaica signed an agreement for the support of the agricultural and security sectors with the UN on 4 May.  The United Nations Development Assistant Framework (UNDAF) is providing US$39.4m for the implementation of development plans from 2012-2016 in three areas: environment; social empowerment and equity; and safety, security, and justice.  The agreement is an extension of the 2007-2011 J$7.5bn (US$88.6m) programme for initiatives in education, HIV/AIDS, poverty and the environment, health and justice, and peace and security.

The interlinking of security issues with poverty was emphasized in the World Bank’s World Development Report published in April, which suggested that Jamaica spends US$385m a year on indirect medical and other costs related to crime and violence.

According to the Jamaican police, there was a 44% reduction in murders in Jamaica in the first three months of 2011.