Although the International Monetary Fund (IMF) says that the country in on the right path to meet the June quarterly performance test, the technical memorandum of understanding agreed to by the international lending agency and the government is saying something different.

For example, under the agreement, the primary surplus should be running at $12.1 billion in June in order to meet the target of $83 billion set for this year, yet the actual outcome for May was just $3.2 billion.

The primary surplus measures the difference between total revenue and grants and total non-debt expenditure and the extent to which the government is cutting back on spending in order to service the debt.

During the first quarter, the government had drawn down on several public sector agencies, including the Bank of Jamaica in order to meet this vital solvency test. This helped to push the central bank’s losses to $10.0 billion during the first six months of this year.

Similarly, central government and the public sector accumulated over $100.0 billion in suppliers, employee and tax arrears during the period to March 31, although the programme calls for zero arrears.

The exchange rate outlined in the programme calls for a floor of J$89.35 and a ceiling of J$95 but the currency is now trading at J$86.41 to the US$1, yet the IMF says the programme is on track. The overall public sector deficit was also running at $7.3 billion in May when the programme calls for a deficit of $3.0 billion.

Analysts say that the government is likely to raid all public sector bodies and pile up more arrears in order to meet this target.

Meanwhile, exports are also running at US$1.3 billion annualized, when the programme calls for a rebound to US$1.6 billion this year. Imports also running at US$4.2 billion annualized, although the programme projects them at US$4.2 billion.

Speaking at Jamaica Chamber of Commerce (JCC) board meeting Dr.Gene Leon, the IMF senior representative in Jamaica stressed a team from the IMF would arrive in the island in August in order to conduct its assessment of the country performance, while pointing out that recent macro economic data indicated that the country is in an improved position.

He was also quoted as saying that barring a natural disaster, the country could should pass the June test and further that exporters did not quarrel when the dollar depreciated by 20 per cent to almost J$90 to the US$1. Dr Leon also argued that the appreciation to J$86 to the US$1 would have an impact on exporters, while stressing that it was not so bad.

He said that the fund used three methods to determine the equilibrium or market clearing exchange, while pointing out that one method indicated that the currency was undervalued and another that it was overvalued. Dr. Leon however, said that the Fund does not follow these methods in a slavish way.