Caribbean & Central America - October 2013 (ISSN 1741-4458)

In the last two issues of Caribbean & Central America Report we have addressed concerns that Jamaica could be heading towards “failed-state status”. The issue had been raised by Professor Brian Meeks at the ruling People’s National Party (PNP) 75^th anniversary symposium in July. Meeks did not actually say that Jamaica was a failed state but that it could be “gradually heading” towards that status without knowing it, like “a frog in hot water”. Our own view, expressed in the July and August issues, was that the fears were exaggerated. Further relatively positive news during the past month suggests that is the correct assessment.

The most obvious piece of good news for Jamaica in the past month has been the successful completion of the International Monetary Fund (IMF)’s first quarterly review of Jamaica’s performance under its 4-year US$944m Extended Fund Facility (EFF) arrangement. The successful completion of the review not only allowed for the IMF to disburse a further US$30.6m (taking total disbursements to US$240.4m), it also opened the way for a further US$330m in multilateral support. The World Bank is due to provide US$200m with the rest coming from the Inter-American Development Bank (IDB).

In its commentary on its review, the IMF said: “Overall programme implementation under the Extended Fund Facility (EFF) has been strong, despite the weak economic environment. The authorities’ continued commitment to the program objectives of strengthening Jamaica’s fiscal position and creating the conditions for sustained economic growth will be critical to a revival of investor confidence and domestic demand in the period ahead.”

For the remainder of fiscal year 2013/14, the IMF listed the priorities as including “the enactment of an effective fiscal rule to lock in the gains from the fiscal adjustment thus far, and a comprehensive tax reform to broaden the tax base and reduce distortions”.

The good news from the IMF, announced on 30 September, was anticipated by a few days by Standard & Poor’s, which on 26 September raised its long-term foreign and local currency credit ratings on Jamaica to ‘B-‘ from ‘CCC+’. The outlook is marked as stable. Jamaica’s short-term foreign and local currency ratings were lifted to ‘B’ from ‘C’.

Despite the relatively good news, however, Finance Minister Dr Peter Phillips has continued to hammer home the message that tough times lie ahead. Speaking on 30 September to The Gleaner newspaper, Phillips said that there was no place for complacency. He said: “It is still early days and we have to maintain the same level of vigilance if we are to reduce the debt and to establish the conditions for growth.”

The long term aim is to reduce Jamaica’s debt-to-GDP ratio to no more than 60% by 2025/26. It is currently running at about 150% of GDP. Phillips said: “For us the end objective is the reduction of debt, the return of growth.” However, he added: “But it is no doubt we have a very difficult period before us; it has been difficult, still difficult, I think what we have to understand is that any course of treatment for any individual who had to undergo a medical procedure, or any change in direction, involves hardships, but we need to be clear that there is an end objective.”

Luckily for Phillips and the PNP government, the politics remains favourable for the time being. First of all, the Portia Simpson-Miller government enjoys a clear majority in parliament and does not have to face the electorate again until late 2016.

Secondly, the opposition Jamaica Labour party (JLP) is riven by internal strife as it deals with a challenge to its leader Andrew Holness. The challenge, to be decided on 10 November, is coming from deputy leader Audley Shaw.

Holness has been in a weak position from the moment he took over the premiership from Bruce Golding and then called a snap election two months later in December 2011, which he lost. The PNP took 41 of the 63 seats on offer, an increase of 13 over its 2007 result. The loss meant that the Golding/Holness administration was the first one-term government in Jamaica’s history – and, despite the austerity, on current form it does not look as if the current Simpson-Miller administration is going to match that unique achievement.

Shaw is basing his run for the JLP leadership on the basis of a “lack of assertiveness” on the part of the JLP. Shaw says that the JLP under Holness is failing both to keep the government accountable and to present itself as a viable government in waiting. In a statement announcing his challenge, Shaw also claimed to see “a serious lack of motivation and low morale among our party members and functionaries”.

What made matters worse for Shaw was the fact that the JLP’s lack of progress comes at a time when youth unemployment is “close to 40%”, the Jamaican dollar “is at its lowest in the country’s history…sending prices through the roof” and “crime is on the rise with an average of four persons being murdered each day”. What the JLP needs now, argues Shaw, is “strong, visionary, and decisive leadership”.

But if Shaw is finding Holness a relatively easy target to hit, he appears not to be making much of an impact beyond. He also has a dubious track record of his own, having been the finance minister who negotiated an agreement with the IMF that the government, in the end, proved unable to adhere to. As The Gleaner put it in an editorial: “That credibility factor has to be addressed.” In the meantime the prime minister seems secure in her control of the PNP with no one at the moment looking likely to challenge her leadership ahead of the next election.