
File
Brian Wynter, governor of the Bank of Jamaica, to get personally involved in IMF talks.
Lavern Clarke, Business Editor
Brian
Wynter has found himself in the role of student, spending last week
reacquainting himself with an institution where he worked in the past
decade, but now returns to head in a period of turbulence and a great deal of controversy.
The new Bank of Jamaica governor, who was called early to Nethersole Place, is on a very short learning curve, however, telling Sunday Business
on Thursday that he would not be leaving the critical International
Monetary Fund (IMF) negotiations to other officers at the central bank
but would be getting personally involved, though he is taking over at
what the markets hope is the tail end of the talks.
“I don’t have the luxury of standing by,” said Wynter. “This is obviously very significant.”
Dismissed BOJ governor Derick Latibeaudiere was leading the talks for Jamaica up to his departure in October.
Not the same supreme role
But
while deputy governors Audrey Anderson and Myrtle Halsall were heavily
involved in the negotiations, Wynter says he has been briefed and would
step in as the BOJ’s chief representative, but he would not have the
same supreme role. Financial Secretary Dr Wesley Hughes now heads the negotiating team.
Wynter took up his posting 10 days ahead of schedule, a circumstance dictated, he said, by the fact that “there is a lot of work to be done”.
The
new governor has been away from Jamaica for two years, but is likely to
need little reschooling, coming to the job with deep knowledge of the
financial system as a former deputy governor up to 2000, and later as
executive director of the Financial Services Commission for more than
six years to the close of 2007.
Jamaica is attempting to strike a
US$1.2 billion deal with the IMF for balance-of-payment support, which
in turn should loosen the purse strings of other multilateral lenders from whom Jamaica is seeking budgetary support and cheap funds to replace expensive and burdensome debt.
Outside
of its own budgetary load, three watchdogs for investors - the ratings
agencies - have been pummelling Jamaica with downgrades of its
sovereign credit, negative-watch labels, and not-so-subtle
psychological pressure from warnings that any ‘debt restructuring’
would for them be a default - even though that is the outcome no one
wants.
Wynter on Thursday was clear that he would not at this
stage be going into policy issues, nor negotiating positions, and he
flatly declined to speak on a potential wind-up date for the IMF talks,
the issue that is making Jamaican markets - and the ratings agencies -
the most nervous.
A deal was first expected at the end of
September, then October, then November. No other timetable has been
advanced since sister publication Wednesday Business reported
that the last date would be missed and that the talks would extend into
December. There are now reports that the Government and big financial
institutions are close to finalising a new liquidity-management
programme, being crafted to avoid the technical default that the rating
agencies have threatened.
Latibeaudiere’s philosophy in 13 years
as governor was clear: keep inflation tamed through aggressive use of
interest rates to curb money supply and keep the dollar stable. His
most infamous move was the 20-point hike in rates in two adjustments
done in one week that placed benchmark six-month rates at 33.15 per
cent and the one-year at 35.95 per cent back in March 2003.
Creating headaches for corporates
That
aggressive monetary position has fostered a landscape of high interest
rates for Jamaica, creating headaches for the corporates on two fronts:
having to compete with a debt-addicted government for capital; and
declining competitiveness against regional and global trading partners
who have access to cheaper cash to finance their businesses.
The
big commercial banks have got uber rich in the process, with the
largest two reporting a combined $21.8 billion of net profit in the
past few weeks.
Latibeaudiere was said to have been dismissed
because his potential $38 million salary package was too attractive for
a capitalist but near-bankrupt society like Jamaica to stomach.
At that pay scale, his salary would have been comparable to the big bankers whom he kept in line.
But before the issue of pay was ever raised, Latibeaudiere for two years, as the Financial Gleaner
reported twice, found himself in the position of denying that he was on
his way out because of tensions between him and the Bruce Golding
administration.
He was a man who thought interest rates were to be used as he saw fit, while others were saying bring them way down.
Rates are still hovering at around 17 per cent.
The November auction on Wednesday signalled that the market was willing to continue lowering the floor on rates.
The
yield on the six-month benchmark treasury fell about 10 basis points to
16.936 per cent, from October’s 17.04 per cent. The three-month bill
yielded 15.992 per cent.
With Latibeaudiere’s departure, the
pundits, former government officials, and even the premier trade lobby,
Private Sector Organisation of Jamaica (PSOJ), have called for the
central bank to be restructured.
Wynter said while he has not
studied the various positions, the reconfiguration of the central bank
is not something to be rushed, but he was not willing to signal his
thinking on the issue, nor even to say if it had come up in
conversations with Finance Minister Audley Shaw or Prime Minister Bruce
Golding.
Don Wehby has suggested that the governorship be
separated from the chairmanship of the BOJ board, and that a
nine-member monetary policy committee, including central bank senior
staff, government representatives, and independent members, be created
to set interest rate policy, a function now strictly guided by the
governor.
Amending the law
The PSOJ agrees with the
committee’s creation, insists it can be done quickly by ministerial
order, but says the composition should be seven members - four from the
BOJ and three independents - eschewing the need for finance ministry
representation as Wehby had proposed.
Governor Wynter said
Thursday he would have to study the proposals more carefully before
coming to a position, but said, in contrast to the PSOJ position, that
such fundamental changes could not be rushed and was not now the most
urgent issue.
“It may require amending the law,” he said, “and you don’t do that rapidly.”
But
governor and board chairman Wynter seems to think the central bank is
doing fine as it is currently configured, and was complimentary of the
team he has found in place.
“This is a fine institution with first-class staff,” he said. (Jamaica Gleaner)