The government of Jamaica has broken off negotiations with the International Monetary Fund for new credits, leaving the Caribbean country with no financing to cover some $150 million in foreign debts coming due this year.
The breakdown of the credit talks came Monday when the cabinet of Prime Ministr Michael Manley refused to accept IMF loan conditions that included a $50 million reduction in government spending in 1980.
Arnold Bertram, a government spokesman, said in a telephone interview yesterday that the spending cuts would put 10,000 to 11,000 Jamaicans out of work and would force Jamaica to "dismantle" programs in health welfare and literacy.
Bertram said Jamaica "accepts and intends to honor its commitments to public and private lenders," and added that a search for other sources of financing will include contacts with socialist-bloc countries.
Bertram left open the possibility of resuming talks with IMF respresentatives.
Finance Minister Eric Bell, who had been trying to work out a compromise, resigned before the cabinet vote, saying he was "unable to carry out his responsibilities."
IMF officials in Washington confirmed yesterday that the lending institution and Jamaica had been unable to reach agreement on terms for a one-year standby credit. In January, the IMF halted loans under a $244 million, three-year program begun in 1978, citing Jamaica's continued inability to curb its budget deficit or to improve its balance of international payments.
The current dispute is one of a long series that over the years has embroiled the IMF in confrontations with such countries as Portugal, Turkey, Peru and Chile. With rising oil bills causing many countries to go deeply in debt, IMF lending has played a crucial role in financing balance-of-payments deficits.
However, its critics charge that, in coming to the rescue, IMF often has imposed extremely tough conditions that choke development and are politically difficult to swallow.
Tanzania expressed interest in medium-term IMF financing last fall, but is reported to have backed away from IMF terms. However, Tanzania was reported by the Financial Times of London recently to be considering reopening discussions.
In Jamaica, the IMF conditions have been a constant source of debate, and a political touchstone for the government of Manley, whose People's National Party may face an election late this year against the Jamaican Labor Party.
To obtain IMF's initial $244 million loan in 1978, Jamaica accepted harsh conditions that included a 30 percent devaluation of its currency, stringent controls on imports, big tax increases on manufacturing and tourism, higher interest rates and wage controls. Subsequently, the government also agreed to some spending cuts.
However, difficulty in attracting foreign investment and a disappointing return on bauxite, the aluminum base that is the country's major resource, have resulted in continuing economic problems.
Jamaican officials estimate that the country will owe $150 million more to foreign banks this year than it will have available in foreign exchange, possibly setting the stage for defaults if financing is not obtained. A number of other developing countries are in a similar plight, with no relief in sight. o
In Bertram's view, the IMF conditions "don't answer the fundamental problems of the economy; we've been more or less forced to go along because of the need for foreign exchange. Our experience has been very bitter."
IMF officials respond that lending to Jamaica has been high considering the country's size and economy.
In June 1979, the credit line was increased to $260 million and, between then and the IMF lending freeze, $113 million was used by Jamaica.
The recent showdown came after IMF representatives agreed to make new credits available at the end of April, in return for the government spending cuts.
But when the executive council of Manley's party met March 8 and 9, feeling reportedly ran strong against further concessions to the IMF. Last week, Bertram said, the council recommended that the cabinet reject the terms of the agreement.
Congressional hearings on IMF policies have won some sympathizers on Capitol Hill for some changes. Rep. Henry S. Reuss (D-Wis.), chairman of the House Banking Committee, has advocated that IMF weigh the effects of its loan conditions on employment, prices and human needs as well as a country's balance of payments.
Reuss has introduced amendments to legislation that would direct U.S. representatives on the IMF to ensure that these factors are part of loan guidelines.