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A credible fiscal and economic plan, designed to gain the trust and confidence of the society, is among five critical planks, put forward by Financial Secretary, Dr. Wesley Hughes, on which he said, Jamaica’s fiscal adjustment programme must be grounded.
He cited the Jamaica Debt Exchange (JDX), launched in January, as a prime example of this strategy.
“The buy-in and participation in the JDX by local market players was a resounding show of confidence in the government’s plans going forward. People were willing to take an interest rate cut, consolidate, and accept longer maturity periods because they expect that, in the long run, there will be recovery and growth for all,” Dr. Hughes stated.
He was addressing a recent investment forum sponsored by the Financial Services Commission (FSC) on “The Jamaica Debt Exchange: The Way Forward”.
Adapting the International Monetary Fund (IMF) paper titled: ‘Ten commandments for fiscal adjustment in advanced economies’ to the local context, he said that the second plank entails an aggressive debt reduction strategy to reduce the public debt-to-gross domestic product (GDP) ratio over the medium to long-term to sustainable levels.
“This second plank requires strategic targeting of a medium to long-term decline in the public debt-to-GDP ratio, not just its stabilisation. Ratios that exceed 60 per cent are unsustainable,” he said. He explained that it is for that reason that one of the amendments to strengthen the Fiscal Responsibility Framework (FRF) speaks, specifically, to that issue.
Attendant strategies linked to debt reduction are: containment of the wage bill; limiting the waivers/concessions to special groups; and ensuring that there is an effective social safety net, through targeted social transfers, to provide for those most vulnerable and most affected by the fiscal adjustment policies.
Thirdly, Dr. Hughes maintains that the government must apply fiscal consolidation strategies in the areas most conducive to supporting growth. “This third plank requires focused fiscal consolidation in the areas that are most conducive to supporting and generating growth,” told the audience.
The fourth strategy put forward by the Financial Secretary, involves a focus on pension reform as part of a medium-term expenditure and debt containment strategy. He stated that, “if we do not address pension reform, the tax system is what will be used to redress the burden on the public purse.”
The fifth plank, Dr. Hughes said, requires the strengthening of the governance, rules and capacity of fiscal institutions to sustain a credible and believable fiscal adjustment over time.
“What we have in place has allowed a runaway growth in the public debt. The present system of governance is clearly in need of fundamental reform. This is the logic behind the FRF; better fiscal rules, better budgeting processes, better fiscal monitoring, better accountability,” he explained.

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