The Government has started preliminary talks with the International Monetary Fund (IMF), in preparation for a fuller negotiation.
This was disclosed by Minister of Finance, Planning and the Public Service, Hon. Dr. Peter Phillips, in an address to the Mayberry Investment Forum at the Knutsford Court Hotel, in Kingston, on January 18.
Speaking on the theme: 'Jamaica's next 50 years: Opportunities and Challenges we face as a nation’, the Minister reiterated that the new administration is desirous of entering into a new agreement with the IMF in the shortest possible timeframe.
"These negotiations are going to be tough, but based on the discussions today (January 18), I can say that there is a spirit of goodwill and the atmosphere is good," Dr. Phillips said.
Although the discussions are at the "preliminary" stage, the Minister was emphatic that any new agreement will enhance economic stability and inspire confidence.
"This agreement will be based on the establishment of credible, predictable and achievable macro-economic targets that will inspire confidence among local and international investors, as well as other stakeholders,” he assured.
The Minister indicated that in the medium term, "any programme going forward must involve comprehensive tax reforms, reform of the public sector pension system, public sector transformation and a reduction in public sector costs."
With respect to the reduction of the public sector wage bill, a major sticking point of the Standby Agreement with the Fund, the Minister explained that wages “constitute only one of the costs of the public sector,” and emphasised that cost reduction would have to be effected in “the other cost components of running the public sector, such as utilities, rent, waste, corruption and general inefficiencies."
Rationalising the need for a new agreement with the IMF, the Minister observed that the current IMF Programme, which is scheduled to expire in May 2012, has not been completed because various critical structural benchmarks and targets were delayed or missed.
"An entirely new programme now has to be negotiated and new targets set, focusing on growing the economy,” he declared.
Dr. Phillips argued that failure to successfully complete the Stand-By Arrangement had resulted in the non-disbursement of multilateral funding, including US$220 million from the Inter-American Development Bank (IDB).
"We expect that progress on the IMF negotiations will help unlock these funds," the Minister stated, noting that there has been no formal discussion between the Government of Jamaica and the IMF since May last year.
Looking ahead, Dr. Phillips emphasised that a sustainable resolution of the (country’s economic) problem must start with “an acceptance that there is a problem, and a determination to fix it."
He declared that the Government is determined to correct the problem, and that, “we will fix it in a framework of national and international partnership."