Barbados can come out stronger at the end its four-year International Monetary Fund (IMF) program, should Government learn the lessons from Jamaica’s experience.
This advice came from former co-chair of Jamaica’s Economic Programme Oversight Committee (EPOC), Richard Byles. Delivering the featured address for the Barbados Chamber of Commerce and Industry (BCCI) quarterly luncheon this afternoon, Byle offered the blueprint for Jamaica’s remarkable four-year turn-around from inability to borrow on the capital markets to being a poster child for the IMF.
Byles, who is also the chairman of Sagicor Jamaica, revealed that this was only possible through strong leadership, transparency, independent oversight and a bit of luck.
He explained that the circumstances which forced Jamaica to turn to the IMF were very similar to those currently faced by Barbados with very high debt to GDP ratios and low foreign reserves. He also pointed out that like Barbados, Jamaica’s target under the IMF was extremely daunting. Therefore it took strong leadership and political will to ensure that country stayed the course in the face of heavy skepticism from all ends, Byles noted.
“When we approached the IMF, they were very skeptical about our commitment to carry through a program. Indeed they were just as skeptical about a country being able to pull themselves out of a 145 per cent debt to GDP without a massive debt haircut… So we had to do a massive tax package to lift ourselves to a 7.5 per cent primary surplus. You would recall that Greece rioted about the same time for three per cent primary surplus,” he said.
Under its IMF programme, Barbados has been asked us to sustain a six per cent surplus target for the majority of the four years, as a pre-condition for assessing any further loans from the IMF and other support institutions.
Byles pointed out that similar to Barbados’ monitoring committee, EPOC was also established from representatives of the domestic creditors, private sector and trade unions. This group was given access to all of the data on Jamaica’s progress under the IMF program. The group also had the authority to consult with the IMF and make comments to the public. Apart from holding government’s feet to the fire to make good on the country’s commitment, such an oversight body provides transparency, which helps to build confidence among the general public, he explained.
“I think also that EPOC allowed a sense of patience to develop amongst the public. So by seeing that targets are being met and by hearing from people who had no special political bias that these targets were being met, people developed a patience and were willing to give the program a chance to work,” he said.
However while the businessman seemed to suggest that Barbados’ prognosis on surviving the IMF was positive, since the Mia Mottley-led administration has started ticking many of boxes checked by Jamaica, he warned that the journey was still fraught with pitfalls. He warned that naysayers and detractors will create disbelief along the way and that only actual results could combat this. Byles also pointed out that based on the Jamaican experience, the risk of structural adjustment fatigue is very real.
“There’s a risk of fatigue from too much of this reform and not feeling something tangible and positive. So after two, two and a half years of hearing yes we are hitting these targets people started to complain that they were not feeling it. You must remember that there was tax reform, wage freeze and increased cost of living, which were a lot for people to bear,” he stressed.