Jamaica and the practice of dependency

As of July 11, 2017 revenue earned by the Tourism Enhancement Fund, the Jamaica Civil Aviation Authority, and the Culture, Health, Arts, Sports and Education (CHASE) Fund will go directly to the consolidated fund instead of to the revenue accounts for these agencies. The National Housing Trust (NHT) will also have it’s surplus put directly into the consolidated fund.

The Government says that the reason for doing this is to provide budgetary support. Think about needing budgetary support when your debt to GDP ratio is 115%. You always need support to finance your budget. Jamaica cannot repay the debt it owes nor can it finance its own operations. Jamaica needs IMF loans. Jamaica has been borrowing money from the IMF since 1963. It terminated borrowing in 1996 and returned to a borrowing agreement in 2010.

The IMF lends money to countries if they agree to take measures to improve their economy and the management of public finances. The country agrees to be monitored and evaluated at regular intervals. They also have to meet all targets to continue to get access to the loan. Failing to meet the benchmarks jepordizises the loan agreement. This happened to Jamaica in 1977 and 1979. This time the Jamaican government has set up the Economic Programme Oversight Committee (EPOC) to ensure that the IMF performance targets are met.

Budgetary support versus IMF conditionalities

Countries like Jamaica who need to borrow money from the IMF will be described as having two critical problems; fiscal indiscipline and poor public finnace management.

The Government of Jamaica has to comply with an IMF requirement for improving public financial management by redirecting the revenue from self-financed public bodies into the consolidated fund.

The IMF believes that it is better to have these revenues in the government central fund and then the government will prioritize how the funds are to be allocated to the entities.

The head of the Tourism Enhancement Fund (TEF) has protested against the decision by the government. He argued that the measure will have a negative impact on their ability to work effectively. A similar dilemma is ahead for the Culture, Health, Arts, Sports and Education (CHASE) Fund. CHASE Fund is an entity which receives a percentage of the proceeds of lottery operations in Jamaica to fund grants and scholarships in the areas of Arts and Culture, Education and Health.

The Government of Jamaica and the IMF are agreeing to divert funds away from the core activities of these agencies so that the government will be able to have a larger pool of revenue to better support national priorities and critical areas such as fighting crime.

Whether these public entities were efficient or not is no longer the question. The assumption by the IMF is that the Jamaican government can be taught fiscal discipline and better public financial management.

The error of this assumption by the IMF was recently demonstrated when the public learned that over the period of a year the phone bill for the Minister of Finance was over $8 million Jamaican dollars. The Minister of Finance apologized and explained that he had not seen the bill and that upon investigation the majority of the bill was for data charges. He did not know that he should turn off the mobile data on his phone.

The management of public finance must be difficult for democratic states like Jamaica.

Every 5 years citizens are asked to select a government. Those wishing to form the government compete for citizen votes based on proposals to provide for their needs.

Those wishing to form the government know that they have to be prepared to offer the citizens something of value; roads in their communities, houses, free health care or free education. Those wishing to form the government must present an irrestible offer to the citizens.

Many people observing the last election in Jamaica would see that the Jamaica Labour Party (JLP) won the elections based on the “strength” of it’s proposal to give a tax break by increasing the income tax threshold to $1.5 million.

Later the minister of finance announced that money would be taken from the NHT to fund the “tax give back”.

Appealing to masses of citizens with deals like this has become a standard feature of government in Jamaica. (An idea I first heard fron economist Damian King) masses of the citizens are descendants of africans who used to provide slave labor on sugar plantations controlled by English men. the The systematic disenfranchisement of the descendants of the African has fed politicians for generations. Some people have been conditioned to think they need to be provided for by the politicians who happily play the role of the benovelent father watching over his children and providing for their every need. Politicians spend billions of dollars every year on pilots, interventions and promises locking us into a generation debt cycle.


1 thought on “Jamaica and the practice of dependency”

  1. Reblogged this on Petchary's Blog and commented:
    I haven’t written much about Independence, and now that the long weekend is winding down, I am not going to get to it. But here’s a perspective from Afifa Aza. I suspect many might agree with her comments on this cycle of dependency.

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