Senator Wehby Says Jamaica May Need IMF Support, if Global Crisis Persists

Minister without Portfolio in the Ministry of Finance and the Public Service, Senator the Hon. Don Wehby, says the Government may have to enter into a standby facility with the International Monetary Fund (IMF), in order to fulfill the country’s balance of payments, if the current global economic downturn persists.
Noting that the public debt currently totals just over $1 trillion, he said that the recession could present a “best case, worst case scenario”, but that fiscal 2009/10 would signal the start of the reversal of Jamaica’s debt problem which, he said, needs to be tackled.
Addressing Scotia DBG Investments inaugural Corporate Investment Seminar at the Hilton Kingston Hotel, Tuesday (May 12), Senator Wehby said that while improvements are expected in the country’s current account this year to reduce the figure from 19.2 percent to 14.2 percent of Gross Domestic Product (GDP), there is a possibility of further discussions with the IMF.
He said Jamaica has been impacted by the effects of the global recession on the country’s major trading partner, the United States. The US has seen unemployment jump to 8.5 percent, consequent on the loss of 5.3 million jobs over the 12 month period ending in March. This development, compounded by crumbling major financial entities, is expected to result in a 2.8 percent contraction of its economy
Senator Wehby said that the impact on Jamaica, for 2008, was that the economy contracted by 0.6 percent and in formulating the 2009/10 budget, negative growth of between 2.5 percent and 3.5 percent has been projected.
“We expect real sector activities to be affected by the decline in demand for exports, lower capital inflows, and a reduction in remittance flows,” he said. He also stated that inflation is projected to range between 11 percent and 14 percent.
Regarding foreign exchange inflows, Senator Wehby disclosed that while a BoJ report, for the period ending March this year, showed a 15 percent decline compared to last year, there has been no significant fall off in remittances from the Diaspora.
“What is encouraging is that the Jamaican Diaspora, notwithstanding the problems in the USA, the United Kingdom and the world, seems to be holding up in terms of sending money back home. (However), if the situation gets worse, in other words, if no bauxite or alumina is exported, our tourist industry suffers tremendously, oil prices trend up, (and) if remittances fall off more than 15 percent to 30 percent, there is a real possibility we will have to enter into a standby facility with the IMF,” he contended.
Highlighting the seriousness of the global recession, the Minister said that during his visit to the IMF, over a week ago, representatives from some 14 countries were seen waiting for discussions with the principals regarding securing assistance for their economies. He added that both Costa Rica and Guatemala have already signed off on assistance.
Senator Wehby pointed out, however, that his visit was “exploratory” to determine the options for Jamaica, in the event that a worst case scenario happens.
“As we speak, our net international reserve (NIR) is at about US$1.6 billion. That’s about 12 weeks of imports, and that’s a comfortable level. However, if you look at the worst case scenario, a year ahead, that US$1.6 billion could become US$800 million, and that’s when you really (would) have to start having a discussion,” he concluded.