Responding to Financial Crisis: Better Off Without the IMF? The Case of Jamaica

This paper argues that the International Monetary Fund (IMF) needs to reform the methods it uses to help developing countries manage their financial crises. The paper illustrates its argument with a detailed case study of Jamaica, which managed its financial sector crisis during the 1990s without the assistance or involvement of the IMF.

The authors state that:

• The financial crises that have afflicted developing countries in recent years have highlighted the need to develop a policy response to the vulnerability of financial systems;
• International financial institutions (IFIs) have been involved in formulating developing countries’ policy response to financial crisis, and the IMF has played a central part in their contribution;
• However, IMF policies have been increasingly criticized for weakening public confidence in the financial system, leading to a debate on its future role.

The paper argues that:

• The outcomes of the measures that Jamaica adopted in addressing the crisis were superior to what might have been the outcome had it adopted IMF prescriptions;
• Crisis management programs are more likely to succeed if they draw on the national stakeholders’ expertise and knowledge of the particular structural characteristics, past experience and political economy of the affected country.

The paper concludes with lessons drawn from the Jamaica case study for the reform of IMF support to developing countries in managing financial sector instability and crisis.