LAST week I was a guest on the radio programme The Breakfast Club where I was asked to give my opinions regarding the IMF and Jamaica going forward.

The key points that I made and believe that many Jamaicans may be overlooking are that the circumstances faced by the new PNP administration are not exactly the same as those faced by the JLP administration, and that this is not the same IMF.

The last IMF agreement, a Stand-By Arrangement (SBA), was negotiated under circumstances involving a worldwide recession that was one of the worst ever seen. It caused a massive falloff in bauxite earnings for Jamaica, production was down some 60 per cent, and the whole world was in crisis. An SBA is typically 12-24 months and repayment is due between 3.25 and five years. It is generally meant so assist with short-term balance of payments problems, the case where a country cannot secure enough financing at affordable rates to meet international obligations.

With foreign exchange earnings from bauxite all but disappearing, remittances falling as much as 33 per cent, and tourism having to resort to heavy discounting to maintain occupancy levels during the global crisis, Jamaica was in the middle of such a balance of payments problem. Add to that the significant debts being racked up by Air Jamaica, the Sugar Company of Jamaica and Clarendon Alumina Partners.

This balance of payments crisis also happened during the oil crisis of the 1970s when Jamaica's oil import bill increased some 172 per cent between 1973 and 1974, forcing then Prime Minister Michael Manley to eventually sign a deal with the IMF that he felt was very unfair. The PNP of today are not faced with a global recession, but instead face a different set of circumstances. The European Union is faced with a crisis that has engulfed Greece and Italy, while threatening other countries and the euro currency itself. Oil prices are trending up and could skyrocket if Iran makes a move to close the Strait of Hormuz, one of the busiest shipping lanes for oil.

These two things, however, may not happen, but even then Jamaica would still have a long-term balance of payments problem. It is of note that the PNP do not have to worry about debts being racked up by Air Jamaica or the Sugar Company of Jamaica, but Clarendon Alumina Partners is yet to be divested (it was supposedly part of the last IMF agreement signed by the JLP, but a sale has not taken place).

In the past, I said that Jamaica should pursue an Extended Fund Facility (EFF) with the IMF once negotiations resumed. An EFF is meant to help countries address longer-term balance of payments problems reflecting extensive distortions that require fundamental economic reforms and usually lasts three years. Repayment is often between 4.5 and 10 years after disbursement.

I support an EFF because the medicine is administered over a longer time period, thus minimising acute shocks; there is a longer repayment period so critical foreign exchange does not start leaving the country too soon before growth is realised, and there is no question that Jamaica needs fundamental reform in many areas.

Few Jamaicans have ever been told about the types of facilities available from the IMF or the differences. Aside from the SBA and EFF, countries can also apply for a Flexible Credit Line (FCL), a Precautionary and Liquidity Line (PLL), or a Rapid Financing Instrument (RFI). Low-income countries can apply for concessionary facilities such as an Extended Credit Facility (ECF), a Standby Credit Facility (SCF) or a Rapid Credit Facility (RCF).

Unfortunately, or fortunately, depending on how you want to look at it, Jamaica is not classified as a low-income country and thus cannot access the ECF, SCF or RCF, which all carry zero interest rates.

Jamaica, instead, is limited to an SBA, EFF, PLL or FCL which charge market interest rates. Our options are again reduced, because the FCL and PLL are both limited to "countries with very strong fundamentals, policies and track records of policy implementation" which obviously is a stretch in describing Jamaica.

Former Prime Minister Golding, and new Foreign Affairs Minister AJ Nicholson have pointed out that Jamaica is among a group of countries that are frozen out of some loan facilities because they are not classified as low-income countries, even though they are highly indebted and the debt poses problems for growth. Like the middle-class in society, this group is beyond the safety net to help the low-income segment but not strong enough to completely help themselves, thus they have limited options because they are in the middle.

The term Staff-Monitored Programme has also been mentioned, but that is not a borrowing arrangement and we have been there and done that before, including such a programme between 2001 and 2002. A Staff-Monitored Programme is simply an "agreement between national authorities and IMF staff to monitor the implementation of the authorities' economic and financial programme during a specified period, normally 12-18 months".

When the JLP approached the IMF later than was recommended by both Edward Seaga and Dr Omar Davies, a different person was in charge. Now, the PNP approaches the IMF headed by a new director -- a director who recently said of the European crisis, "We are not suggesting there should be fiscal consolidation across the board". Her reference was to austerity measures and cutting of national budgets in the face of a crisis.

Instead, Christine Lagarde indicated that austerity programmes must be "tailor-made" for each country. Gone are the days when the IMF blindly recommended that every country applying for help did basically the same things -- slash budgets, cut social spending, fire people from the public service, the typical neoliberal policies that caused havoc and civil unrest in many countries around the world in the past.

Jamaica is now dealing with an IMF headed by someone who does not subscribe to the belief that austerity and pro-cyclical policies solve every economy, and that is a good thing. The IMF recognises that Jamaica is not Greece and will not simply offer the same prescriptions for us. However, we must acknowledge that poor tax compliance, a public sector whose wage increases hurt the national budget when there is no growth, sustained losses at large public entities (JUTC for example), and the lack of expenditure control and accountability are fundamental issues which must be dealt with.

An Extended Fund Facility gives us the time to undertake the necessary reforms and establish real growth in the economy, increase efficiency of the public sector and divest or fix public entities that are dragging down the budget with losses. Unlike previous agreements with the IMF, though, Jamaica must insist that the conditionalities for the funds do not result in cuts to education, a key driver of future growth and prosperity; health care, critical to any country and especially the workers; security, for a country with a reduced but still high murder rate; or destroy more of our agricultural industry like what happened in the 1970s.

The conditions of any IMF funding will need to be made public this time, and any issues with the tests or lack thereof also need to be transparent, unlike in recent memory. The citizens of Jamaica have a right to know what their Government signs on to in their name.

David Mullings was the first Future Leaders representative for the USA on the Jamaican Diaspora Advisory Board. He can be found on Twitter at twitter.com/davidmullings and on Facebook at facebook.com/InteractiveDialogue

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