JAMAICA: WORLD BANK REPRESENTATIVE DISCUSSES JAMAICAN

UNCLAS KINGSTON 000230

SIPDIS
STATE FOR WHA/CAR (VDEPIRRO) (WSMITH) (JMACK-WILSON)
WHA/EPSC (MROONEY) (FCORNEILLE)
EEB/IFD/ODF (MSIEMER)
EEB/ESC/IEC (GGRIFFIN)
EEB/ESC/IEC/EPC (MMCMANUS)
EEB/TRA (VLIMAYE-DAVIS)
INR/RES (RWARNER)
INR/I (SMCCORMICK)
SANTO DOMINGO FOR FCS AND FAS
TREASURY FOR ERIN NEPHEW AND RACHEL JARPE
EXPORT IMPORT BANK FOR ANNETTE MARESH
USTDA FOR NATHAN YOUNG AND PATRICIA ARRIAGADA
OPIC FOR ALISON GERMAK

E.O. 12958: N/A
TAGS: ECON EAID EFIN EINV PREL IDB IBRD IMF JM XL
SUBJECT: JAMAICA: WORLD BANK REPRESENTATIVE DISCUSSES JAMAICAN
ECONOMY

REF: KINGSTON 194; KINGSTON 90

Summary

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1. (SBU) The World Bank will provide the Government of Jamaica
(GOJ) with USD 400 million in concessionary loans over the next 27
months of the International Monetary fund (IMF) program, according
to World Bank Special Representative to Jamaica Badrul Haque, who
met with CDA to discuss developments in the local economy on
February 9. In Haque's view, despite having a clear vision as to
his objectives following the 2007 general elections, Prime Minister
(PM) Bruce Golding has been unsuccessful in getting the public
sector to implement his plans. This failure, Haque believes, has
been due in large part to a lack of political will, effective
communication, and technical competence on the part of the ruling
Jamaica Labour Party (JLP) and the GOJ. However, Haque appears to
think the GOJ finally has realized that it has no choice but to
buck this trend and to face the difficult option of economic
reforms. End summary.



Haque Discusses Engagement in Jamaica

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2. (SBU) Badrul Haque, World Bank Special Representative to
Jamaica, visited Embassy Kingston on February 9 to discuss his
organization's engagement in the country. He began by informing
the CDA that the World Bank had provided the GOJ with USD 100
million during last fiscal year and that it was committing a
further USD 400 million for the next 27 months. While the World
Bank's by-laws did not allow it to dictate an IMF program to a
creditor, Haque noted that the loan funds were contingent on the
country securing an IMF agreement. Haque also said that USD 200
million of the loan could be used for up-front budgetary support,
providing it was not used for negative spending.




3. (SBU) The World Bank loan, which attracts a rate of less than
one percent and is payable over 30 years, is considered an
exceptional allocation, as it is well above the limit for which
Jamaica ordinarily would qualify. Haque explained that Jamaica's
case had been considered favorably due largely to the GOJ's
apparent willingness to pursue economic reforms. According to
Haque, "the country is where it is, but it has been trying to do
something to come out of it," despite the difficulties the JLP GOJ
had faced in making difficult decisions amidst parliamentary
opposition. "That is why it is sometimes easier to work with
dictators since they do not have to seek consensus," Haque opined.




Opposition to New Government

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4. (SBU) Following the 2007 general elections that brought the JLP
to power, Haque said that he felt that PM Bruce Golding had
demonstrated a clear vision as to the economic policies he wanted
to implement, but that he had been unable to get the public sector
to share his views. Haque suggested that, after eighteen years of







People's National Party (PNP) leadership, the public sector had
become highly politicized, making it difficult for the new
administration to chart a different course. However, he also
blamed the JLP for creating some of its own problems, given its
poor communications strategy. He had raised this issue with the
GOJ on many occasions, Haque noted, but said that the assumption of
Golding and his associates was that once an issue had been aired it
had been effectively communicated. For example, Haque pointed out
that the PM recently had set the date for the upcoming budget
presentation in Parliament without first discussing it with his
Finance Minister, Audley Shaw, who had preferred a later date.




Forced to Seek IMF Assistance

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5. (SBU) Haque told Emboffs that, given Jamaica's rocky history
with the IMF, the GOJ had been hesitant to return to a borrowing
relationship (Ref A). (Note: When the GOJ ended its borrowing
relationship with the IMF in 1996, PM PJ Patterson had announced
the decision with much fanfare. End note.) However, the onset of
the global financial crisis in 2008 dried up of credit on the
international market. This financing gap had been initially filled
by the Inter-American Development Bank (IDB) and, to a lesser
extent, the World Bank, but the failure to raise sufficient funds
on the domestic market forced the GOJ to reconsider an IMF program.
Haque noted that the JLP position had been helped by the PNP's
latent support due largely to the fact that they were not willing
to face the alternatives: default, devaluation of the currency, or
both. Despite their criticism of the plan, Haque believes the PNP
is in fact quietly happy with the GOJ's decision, since the
politically painful reforms could well work in their favor by the
time of the next general election, to be held no later than 2012.



Debt Exchange Exceeds Expectations

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6. (SBU) Turning to the now successful Jamaica Debt Exchange (JDX)
agreement (Ref B),Haque informed the CDA that Citigroup had been
working on the operation for almost two years. Initially, the deal
had been expected to save the GOJ 0.5 percent of GDP, but had
stalled after a consultant told the Banker's Association that he
had been responsible for arranging 14 of the last 15 debt defaults.
This had raised alarm in Jamaican banking circles, culminating in
the head of the local arm of Bank of Nova Scotia informing ratings
agencies that the GOJ was moving toward an imminent default. The
ratings agencies - which had been briefed earlier by the GOJ on the
pending debt operation and had agreed to downgrade only on the
announcement - instead had reneged on the deal and had preemptively
downgraded Jamaica's credit ratings. The debt operation then had
been postponed and was only revived at the insistence of the IMF.
Haque said that the revised operation, now expected to save three
percent of GDP, was so coordinated that even the speeches
associated with the exchange had been written by the Citigroup
team.



Comment and Analysis

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7. (SBU) Haque, who had initially been seen as a close ally of the
GOJ, has lost some credibility with the JLP in recent months
because he only has been able to provide Jamaica with USD 100
million during the last fiscal year. Shaw, who had based his
electoral campaign on the acquisition of multilateral funding, has
been disappointed in the limited loan flows offered by the World
Bank, particularly in light of the fact that the IADB had been more
forthcoming with significant funding. Additionally, the GOJ has
blamed Haque for the slow pace of the World Bank loan disbursement.
The animosity recently spilled over into the public domain, with
one of Jamaica's daily newspapers launching a scathing editorial
attack on Haque. He is also viewed with much skepticism, if not
outright defiance, by many public sector workers. Nevertheless, he
is still sought out for technical advice by a number of public
sector leaders, and the USD 400 million World Bank loan should help
re-establish his good graces with the GOJ. End comment and
analysis.
Parnell