IMF primes Jamaica's clogged economic pump
The Reagan administration hopes that Jamaica will become a showcase for its brand of free-market economics. But first a great deal of pump-priming is needed to prop up the battered Jamaican economy.
It is generally recognized by both Jamaicans and North Americans that the island nation's economy must be repaired before it can do the things that Ronald Reagan and island Prime Minister Edward Seagan see as desirable.
Just how much repair is going to be needed became apparent this past week as the tentative size of an International Monetary Fund (IMF) assistance package to the island was disclosed.
Although the final details of the IMF program have yet to be worked out, Jamaica is expected to receive close to $700 million over the next three years. The money comes from a program that eases the financial deficits faced by the island.
For its part, Jamaica will have to adopt strict austerity planning -- something that the Seagan government has already started by reducing spending, eliminating some subsidies, and exerting more control over foreign exchange.
The plan will also open the door to loans and credits from a variety of international lending institutions and private banks. Some $900 million could be made available to Jamaica in 1981-82 from such sources.
This should go a long way toward shoring up the island's staggering economic situation, which includes soaring inflation, high unemployment, large budget deficits, and sharp declines in foreign trade earnings. Foreign debt totals reach beyond $1.2 billion, with some 90 commercial banks owed $450 million of this total. Servicing alone in fiscal 1980-81 accounted for 42 percent of Jamaica's export earnings.
The IMF package is the result of the protracted negotiations between Jamaica and the international monetary organization. These Talks were an on-again, off-again affair under the government of former Prime Minister Micheal Manley. Mr. Manley and his People's National Party found the IMF's governmental austerity requirements politically unacceptable. The result was the virtual breakdown in talks last year.
Those talks were resumed after Mr. Seafa came to office Nov. 1. Seaga is clearly willing to bite the political bullet and to make austerity a theme of his administration. He warned Jamaicans in last year's political campaign -- which he and his Jamaica Labour Party won by an overwhelming majority -- that they would have to tighten their belts in the years immediately ahead to get the island's economy in order.
But Mr. Seaga sees far beyond the immediate IMF bailout and the austerity plan to a time when Jamaica's economy will respond to the free-market system the Reagan administration espouses. He is not starry-eyed about it, but he thinks that Jamaica's economic future is bright if the island can get back on its feet. The IMF program is what he calls "a solid first step."