Prime minister of Jamaica, Bruce Golding. - File

The word out of Government circles is that the technocrats at the Ministry of Finance (MOF) have already developed a draft programme to be submitted to the International Monetary Fund (IMF) in order for Jamaica to access the IMF extended standby facility.

This programme includes the revised medium-term targets and draws heavily on the proposed reforms to the financial and tax systems that are already underway.

MOF officials have been assisted by the small 'team of experts' which has been providing technical advice to Minister Don Webhy over the last year or two.

The Office of the Prime Minister, in announcing developments Wednesday, said Prime Minister Bruce Golding would be consulting with the social partnership group today, "on the terms under which Jamaica should enter into a funding arrangement with the IMF".

The release further states that "this follows a Cabinet directive that Jamaica should explore the IMF Standby Facility in order to keep the goals for the Medium Term Economic Programme (MTEP) on track."

The proposed programme was submitted to the Cabinet on Tuesday, and again officials suggested that the Government will be seeking to borrow US$1.2 billion over three years under the IMF standby facility.

This amount represents approximately 300 per cent of Jamaica's special drawing rights quota with the IMF, which currently stands at SDR$273.5 million.

In addition to the standby facility, Jamaica should also be able to receive a further US$300 million facility from the IMF, without any conditionalities, by around September 2009.

Jamaican authorities

This facility was announced as part of the assistance that the G-20 countries are providing to the less developed economies through the auspices of the IMF.

As a result, the Jamaican authorities will only need to draw down in the region of US$500 million for the current fiscal year.

This would leave an additional US$700 million under the standby facility to be drawn down in years two and three of the proposed IMF agreement.

It is now even more critical that the Government puts the IMF agreement in place over the next few weeks as the announcement of the divestment of the first two sugar factories indicate that they have been sold at prices significantly below the book value of the properties, and the lease arrangements for the accompanying sugar lands are at prices that can be classified as 'pepper-corn' rental.

It's understandable why the IMF insisted on revising the Govern-ment's fiscal targets downwards, especially if this divestment trend continues.

Most analysts have missed the point that in addition to a revision of the fiscal deficit from $55 billion to $78 billion, the official projections from the Bank of Jamaica and the Planning Institute of Jamaica now call for a contraction in gross domestic product (GDP) during this fiscal year in the region of a 3.9 per cent to 4.0 per cent reduction in GDP.

Initial projections were for a 2.5 per cent to 3.5 per cent contraction.

Original projections

In essence the official picture is worse than was projected three short months ago when the Government present the FY 2009-2010 Budget in Parliament.

And this is just the best-case scenario. For example, Standard and Poor's is suggesting that the deficit is more likely to end up at 8.0 per cent of GDP, while some local analysts are still holding to their original projections for a deficit at the end of the current fiscal year in the region of 9-10 per cent of GDP.

So the Prime Minister will now be trying to get the trade unions and the private sector heads to agree with the programme that the Government has developed.

Checks with senior union officials and members of the Opposition indicate that they have not yet seen a copy of the proposed medium-term economic programme.

The Government will, therefore, have to lobby very intensively over the next few weeks with the social partners and the Opposition, in order to have an arrangement with the IMF in place in the next few weeks.

Some persons close to the process have suggested that it would be ideal if the arrangement with the IMF could be put in place prior to the departure of Senator Webhy from the Ministry of Finance.

renee.shirley@yahoo.com