IMF brings billion-dollar tax load to Jamaica

In 1980 the Manley People's National Party's (PNP) government was voted out of office on the campaign slogan - IMF - Is Manley Fault.

That's how Jamaicans translated the acronym of the International Monetary Fund (IMF) that Manley had to lean on for support payments to salvage the economy that had been under extreme pressure due to the international oil crisis.

Now the IMF is returning to Jamaica under the Jamaica Labour party (JLP) government of Bruce Golding. And Jamaicans again have to find billions to support the government's fiscal programs in order to do the deal with the international financial institution.

The main goal of the IMF program would be to address the country's economic imbalances and put Jamaica on a path of sustainable growth.

The IMF is providing the island with a US$1.3 billion loan, but this money won't be for use to support everyday programs. The IMF insisted on certain pre-conditions for the loan and Prime Minister Golding had to comply.

On Thursday his government announced five new tax measures that means Jamaicans will be paying more for basic food items, gasoline products, and electricity. And civil servants won't see another income hike for at least two more years.

Finance Minister Audley Shaw told Parliament that starting January 1st, 2010, the General Consumption Tax (GCT) will move from 16.5 per cent to 17.5 per cent.

The government is also adding several food items to the taxable list, meaning items many items such as bread, canned sardines, mackerel, fresh fruit and vegetables, meat, poultry, fish, and corned beef, will cost 17.5 per cent more.

Golding told parliament the measures are unavoidable.

"There is simply no alternative to raising new taxes, not unless we are going to start identifying which schools we are going to shut down, which hospitals and clinics we are going to close, which government department which may be providing vital services to people we are going to take out, which social safety net programme that seeks to transfer some level of assistance to the very poor and the vulnerable, which one of them we are going to shut down. We can't shut them down, we have to strengthen them and expand them," he said.

"When capital flows that would normally come in do not come in because of the global recession, when your revenues are underperforming yet you still have bills that have to be paid, salaries have to be met, we have had no alternative but we have had to borrow," he explained.

Golding said the country could no longer just borrow its way out of problems.