Recently Jamaica signed an agreement with the International Monetary Fund (IMF), and along with it will come “the tightening of the belt,” job cuts, and increase taxes.
But from where you sit as a small business operator, how are you coping so far? What’s your plan on riding out 2010? Well, retired 70-year-old Samuel Green, a former security guard, feels cheated, and I’m sure many other Jamaicans are feeling the same way.
I now invite you read more about Samuels’ take on how things have changed since Jamaica gained political independence in 1962 in the following news story from Lloyd Nicholas of Caricom News Network.
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JAMAICA- Experts agree IMF deal brings nothing
Sunday, 21 February 2010 09:10 By Lloyd Nicholas
KINGSTON, Jamaica, CMC - Samuel Green, a 70-year-old security guard who has been working in the capital for over 12 years, says he’s been cheated all life and now he is about to lose his employee benefits totaling J$169,000 (US$1,907).
The senior citizen, who suffers from an acute asthma condition, lived most of his life in the capital and remembers nothing but a life of drudgery and suffering even as he acknowledges 30 years ago “man could get more food”.
He does not know why things have changed so much in his homeland where the beat of reggae music thumps in the steps of a strong-willed people whose spices in the national cuisine, jerk chicken, is a craving in many areas of the world.
But although Green is no economist, he could, as he says, feel it in his stomach that times have changed since his country gained political independence in 1962.
Shortly after the island shed Britain as the colonial power, Jamaica registered the second largest Gross Domestic product (GDP) of the Commonwealth Caribbean, second only to Trinidad and Tobago, an oil-rich exporting country.
Jamaica was growing at an annual rate of 4.5 per cent during the decades of the 1950 and 1960’s and thereafter was cruising to a GDP performance of US$1.7 billion or about US$940 for every national in 1985 despite a decline in sustained growth.
It was a time when a quality-of-life index measured by the Overseas Development Council noted that not even Venezuela or Mexico were having a good life as the Jamaicans despite social problems attributed to skewed income distribution.
Now, the trade wind of the good times is swapped for a storm of economic destitution.
Successive years of negative growth and the raking up of a very large external debt burden of over 125 per cent that eats away more than half of government expenditure made the country the fourth largest indebted nation per person.
Some Jamaicans point fingers at political elites for the current situation.
Green, for example, speaking in his local dialect about a public sector wage freeze and other biting austerity measures aimed at jumpstarting the feeble economy, is not convinced of Prime Minister, Bruce Golding approach to reversing the situation.
But long before Green’s gripping, local politicians have always been the butt of citizens’ anger.
Larry Birns, Founding Director of the Washington-based research Think-Tank, Council on Hemispheric Affairs, notes that “while Jamaica evolved a tradition of good governance, in practice it efforts were less than efficient”.
“ (Earlier) governments….were also blamed for declining economic performance despite a myriad of other factors not attributable to a mere poor policy implementation flaw must be given weight,” the former United Nations official told the Caribbean Media Corporation (CMC).
Birns explained that external factors, namely, the oil crisis of 1973-1974 and a recurrent similar experience in the period 1978-1979 created the foundation for the Island’s morass.
Birns was alluding to a posture by economists who blame a spike in global crude oil prices from US$2.70 to US$10.00 a barrel in 1973 as the root cause of the nation’s dilemma.
The price increase bloated the current account of oil producing states from US$7 billion 1973 to US$68 billion in 1974. These very large surpluses encouraged the oil producers to offload their excess liquidity by investing with western banks that in turn offered very low interest soft loans to non-oil developing countries.
Jamaica for, example, had a current account deficit of US$733 million between 1976 and 1980 and had entered into a number of borrowing programmes by the time a second round of global oil increase sprung in 1979.
The new oil spike pushed market interest rates for loans upward and the government essentially, began rounds of shorter period borrowing at higher interest rates in order to amortise previous loan advances at much lower rates.
The rollover of the 1970’s/1980’s debt problems was compounded by an almost crash in the local financial sector during 1995, partly the result of lax regulation and control, leaving the government with debts amounting to 44 per cent of GDP.
But this catastrophe was already preceded by a meager two per cent growth rate in 1993 and thereafter consecutive negative rates during 1996 to 1999.
Last year Jamaica, like other countries was slammed by another global slowdown. Real GDP declined by 1.6 per cent during the 2008/2009 financial year.
So when after another decade of pedestrian and stagnant growth, the International Monetary Fund (IMF) announced in early February that in a joint assessment with the Jamaican authorities, growth is expected to “shift from a contraction of 3.5 per cent during the 2009/10 financial year to 0.5 per cent in 2010/11 and a further two per cent thereafter,” economist started scratching their heads.
Economist and lecturer at the Mona campus of the University of the West Indies (UWI), Dr. Damien King, said there were “too many unknowns…for any expected value to be meaningful,” when asked by CMC for his comments on growth targets for Jamaica’s performance during this year and immediately, thereafter.
King noted that apart from an IMF loan facility which was approved on February, 4., growth will also be subject to ”the nature and expenditure of tax reforms that the government has yet to announce, the duration of the current draught (in the country) and the speed of recovery in the global economy.”
The IMF’s Mission Chief for Jamaica, Trevor Alleyne, told a media teleconference to announce a $1.27 billion Stand-By arrangement for Jamaica, that the IMF could not establish a linear relationship between the loan facility and any expected economic growth.
“No, to put it simply,” he said. “But through the implementation of policies in the programme we would more (likely) link growth prospects.”
In other words, while the loan itself is a substitute for dried up private capital no longer available to Jamaica at this time, it can keep the country marking time but may not be able to guarantee growth.
“There is really no magic bullet to enable a happy economic transit,” adds Birns, while Green, who can’t get his employer to release his outstanding pay is more certain of the outcome.
“Nothing is going to happen, not a thing is going to happen,” he says.
By Lloyd Nicholas, 21 February 2010, http://ow.ly/19IAV
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