- Fiscal prudence and growth are two primary areas that Jamaica must focus on to successfully implement its programme of economic reform.
- The media must play a key role in ensuring that the average Jamaican understands the importance of the government’s prudent management of the country’s budget.
- According to Mr. Byles, the country now has to control its expenditure and maximise earnings.
Co-Chair of the Economic Programme Oversight Committee (EPOC), Richard Byles, says fiscal prudence and growth are two primary areas that Jamaica must focus on to successfully implement its programme of economic reform.
Mr. Byles also believes the media must play a key role in ensuring that the average Jamaican understands the importance of the government’s prudent management of the country’s budget.
In an interview with JIS News Mr. Byles explained that for years the country had spent more than it earned, by borrowing. He said that the debt had become unsustainable, leaving the international financial market wary of further lending to Jamaica.
According to Mr. Byles, the country now has to control its expenditure and maximise earnings. “On the expenditure side, people have been asked to hold strain. There will be no pay increase. The Government has tightened up on spending, generally, and increased efficiencies in the tax collection process. That is intended to produce a surplus, referred to as the Primary Surplus,” he said.
The aim is to have a surplus of 7.5 per cent of the Gross Domestic Product (GDP). This will be used to pay down the debt. This however, is a slow, tedious process,
Mr. Byles pointed out, as it will take 13 years to get the debt in line with what is considered prudent.
In the meantime, the government will put in place the legislative framework for the continuation of prudence in how the affairs of the country are managed, to ensure that Jamaica is on target for its debt reduction target year of 2026.
To this end fiscal rule legislation was passed in the Lower House on Tuesday, March 18, putting a cap on what the country can spend.
The EPOC Co-chair noted that, already, several measures have been put in place under Government’s economic reform programme (ERP). The tax code has been simplified to facilitate more equitable among the various business interests.
According to Mr. Byles, the other key factor on the path to economic stability is growth. “The more growth that can be generated, the easier the (International Monetary Fund) IMF targets will become. Growth will mean more revenues, more taxes and an increase in (Gross Domestic Product) GDP. Debt to GDP ratio is a measure that is used to determine financial stability and if the GDP gets bigger, then the debt will look smaller,” he said.
Mr. Byles noted that because the growth challenge is primarily a private sector issue, the government should endeavour to generate significant stakeholder confidence providing adequate opportunities for growth to encourage investment.
“If Jamaica can pass all four (IMF) tests in our first year, that will have a good impact on business morale and on the international financial community. It’s like climbing a steep hill in the first year and then it plateaus off a little… so it’s not like all the taxes will go away; but there shouldn’t be any new ones. We should be able to carry through the programme thereafter. In the first year, all the tough stuff is there and we’re hoping that it will really build some confidence,” Mr. Byles stated.