Jamaica Gleaner
Published: Sunday | December 30, 2012
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SHAW:IMF deal could be as late as June
Audley Shaw, opposition spokesman on finance.
Opposition spokesman charges that three sticking points delaying new agreement

Gary Spaulding, Senior Gleaner Writer

Opposition Spokesman on Finance Audley Shaw has repeated his charge that the Government's planned agreement with the International Monetary Fund (IMF) is in for a lengthy delay.

In an interview with The Sunday Gleaner - before Finance Minister Dr Peter Phillips issued a release yesterday admitting that the year-end target would not be met - Shaw warned that the deal could be as late as the middle of next year.

According to Shaw, the letter of intent which should have been agreed on with the IMF is facing three sticking points as well as the failure of the Cabinet to agree on a way forward.

"The early signals that this so-called letter of intent would not be ready this month came when Minister of Finance and the Public Service Dr Peter Phillips referred to two sticking points," Shaw told The Sunday Gleaner.

"He (Phillips) told us in Parliament that there are no sticking points, and then in a later presentation, he said there are two sticking points," Shaw declared.

"As a matter of fact, I am suggesting that there are at least three sticking points - the third one being the public-sector wage issue," Shaw charged.

ANOTHER THORNY ISSUE

The opposition spokesman on finance alleged that while Phillips had announced the two sticking points - the downward trajectory of the debt and the issue of tax waivers - he had failed to mention the public-sector wage issue.

"I suspect that the reason he has not publicly admitted that it is a sticking point is because it is such a delicate issue that he doesn't want to discuss it in public."

Shaw suggested that it was delicate because while Phillips on one side was saying that there was need for wage restraints, civil servants such as teachers and nurses have served wage claims.

"The minister is now having a serious credibility problem because it is well known that a letter of intent, once settled, is not an agreement," said Shaw.

"A letter of intent usually will require actual prior requirements before the (IMF) board will approve it. I know because I have been there."

Shaw cited the Jamaica Debt Exchange, which was implemented while he was finance minister, as a classic example of a prior action that was written into the letter of intent with the IMF.

He stressed that the IMF board would not approve the agreement until the debt-exchange programme was implemented.

CONSENSUS NEEDED

"So the debt exchange was written into the letter of intent as prior action. What is obviously happening here is that there are prior-action requirements that the IMF wants in that letter of intent which the minister, the Cabinet - or a combination of both - cannot come to an agreement on."

Added Shaw: "As long as they are unable to have consensus on what ought to constitute this prior action that is holding up the letter of intent itself, and even when you have the settled letter of intent, you must fulfil the prior-action requirement and then, and only then, will you get an agreement.

"The bottom line in all of this is that we don't know when a new IMF agreement is coming, and by this present trajectory, it could be March, April, May or June. You really don't know."

Shaw warned that this situation would continue to fuel further uncertainty in the country with continued decline in the Net International Reserve and a thriving foreign-exchange black market.

According to Shaw, even the two sticking points acknowledged by the finance minister are major challenges.

"In relation to tax waivers, in an act of frustration, he (Phillips) suggested that he would not be relinquishing the sovereignty of his country in relation to whatever demands were being made on tax waivers by the IMF," said Shaw.

"That became, in my view, a sure sign that a settled letter of intent was now in trouble."

Shaw charged that Phillips is suffering from a severe credibility problem because he has consistently been missing promised deadlines for IMF agreement to be inked.

"The most recent promise to be broken is what he referred to as a settled letter of intent which he said would be ready in December.

"While all of this up and down has been going on, the confidence in the business community has been going down sharply and a black market has re-emerged in terms of the acquisition of foreign exchange. I am sticking to my position on that."


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