Tougher Economic Times Ahead - Now to Bite the Bullet

Administrator on October 8, 2014, 8:25 am 699 3
Tougher Economic Times Ahead - Now to Bite the Bullet

You may have heard it expressed at one time or another that there is no "fiscal space" and Jamaicans must face some tough times ahead. On the heals of the fifth round of supervision visits by the team from the International Monetary Fund (IMF) the Ministry of Finance and Planning is saying the same thing again. In keeping with the four year Extended Fund Facility agreed with the IMF, Jamaica had to conform to a number of measures that many Jamaicans still find quite painful. The result has been the successful achievement of the targets agreed with the Fund during the first four quarters of the Extended Fund Facility.

We passed, so what?

With twelve more quarters remaining, equivalent to three years, the warning of tough times ahead is being sounded. This is against the background that the easy items, or low hanging fruits, have been achieved in the first year of this IMF programme, and as the time progresses, tougher targets confront the administration. At least the Government of Jamaica is under no illusion that the road ahead is less than smooth, but are Jamaicans similarly prepared? A major reform to expect during the period ahead is significant change in the way government ministries, departments, and agencies function. Key departments like Customs and the Tax Authority are to be completely reformed to enable them to function more competitively in a globalised marketplace.

In her statement after the visit to Jamaica in June 2014, Christine Lagarde, the Managing Director of the IMF praised the Jamaican government for its commitment to economic reform that is geared toward more prosperity for Jamaicans. She observed an improved economic outlook compared to the previous year, a reduction in unemployment, an upswing in growth, an improvement in the current account deficit and the control of inflation. Indeed, it appears that there is something to celebrate from the big picture point of view, such as the implementation of tax incentive legislation and guidelines for fiscal prudence. What remains pending include establishment of improved tax collection mechanisms, a modern public sector and a stronger business climate. What has helped the reforms also is the strong partnerships between the private sector, the labour unions and the Government of Jamaica to achieve the various benchmarks. It may be that the shared vision 2030 National Development Plan that was launched in 2009 had something to do with this.

Jamaican consumers are however feeling the effects of these adjustments, and even the IMF head conceded that, for the short run at least, this is a painful reality for many. The ongoing wage freeze among public sector workers meant that they continue to face higher prices for basic items of food and essential items, and with further price increases come a greater risk of more persons falling below the poverty line. Consequently, attention to the Social Safety Net component of the reform programme has become critical. The Government of Jamaica would need to balance economic reform pressures against social protection demands and ensure that it steers the ship skillfully to avoid major economic and social instability that have befallen other countries like Greece. Continued social partnerships will therefore be essential as the country faces tough roads ahead.

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