Jamaica Has to Maintain Strong Fiscal Discipline

Finance and Planning Minister, Dr. the Hon. Peter Phillips, says Jamaica will have to maintain its programme of strong fiscal consolidation for the foreseeable future, if it is to continue its downward trend in the debt to gross domestic product (GDP ) ratio.

“There is a lot of discussion about stimulus and other things, but ultimately if we don’t tailor our expenditures to suit the available revenues, then the only way we can sustain it,  is either someone gives you money,  or you borrow more money, and that’s an undesirable prospect, given our debt problem,” Dr. Phillips said.

The Minister was addressing a breakfast forum organized by the Jamaica Exporters’ Association (JEA) on ‘The Omnibus Fiscal Incentive Legislation and its Impact on the Export Sector’, at the Knutsford Court Hotel in Kingston, today (March 7).

He pointed out that the country needs to undertake other structural reforms that facilitate business activity, as the only route to sustained growth “is to create an environment in which the private investor can be persuaded to invest their resources, earn a reasonable return and thereby put people to work in increasing numbers.”

The Minister outlined a number of initiatives that have been put in place to create an enabling environment, including the creation of a single form for registration of businesses; and new leadership appointed to the public sector transformation effort, with a mandate of making it easier for persons to do business.

Dr. Phillips also reiterated that the Government has sought to increase access to credit for enterprises with the passage of the Security Interest in Personal Property Bill, which establishes the Central Collateral Registry that allows personal property to be used as collateral; as well as the Insolvency Act, which is currently making its way through the Parliament and should be passed by the end of the financial year.

He noted that the Insolvency Act represents a fundamental change in how the country treats the issue of bankruptcy.

“Up to now we have treated bankruptcy as something akin to a criminal offence rather than recognizing that enterprising people will often encounter failure as well as success along the way. The interest of the State and of the society is in protecting the creditors, but at the same time enabling the enterprising investors to get back on their feet, try again and potentially find the critical opportunity that will grow their own business and grow the economy at the same time,” he said.

Dr. Phillips added that the State is putting in support in terms of credit to small enterprises as well as convincing banks “to get back into the business of banking with a certain urgency and vigour that has been lost over the years when it was easy to make a profit simply by waiting on the government to build up its debt.”

The Minister provided an update on the country’s economic reform programme, informing that the country’s debt to GDP ratio is firmly on a downward trajectory, and  should be “somewhere between 6 and 7 per cent lower than what it was at the start of the fiscal year.”

Using the International Monetary Fund (IMF) measure, he informed that public debt last year was in the region of 147 per cent of GDP.

Dr. Phillips further informed that the economy registered a modest 0.5 per cent growth in the September quarter and 1.4 per cent in the December quarter, as reported by the International Monetary Fund (IMF).

He pointed to growth in critical sectors, such as agriculture, growing at an annualized rate of approximately 10 per cent; mining, 15 per cent; tourism, at between five and six per cent; and construction, while growth in the manufacturing and energy sectors was soft.

“Our estimates for the quarter ending this March is that the momentum will continue and  be greater, although marginally so, than what was experienced in the previous quarter. So, there is growth momentum in the economy and our purpose is to sustain and accelerate it into the next fiscal year,” Dr. Phillips said.

Meanwhile, JEA President, Marjory Kennedy, pledged her organisation’s commitment to working with the Government to advance economic growth through the export sector.

She pointed out that the JEA shares the government’s concern for the need for fiscal consolidation and the stabilization of the Jamaican economy, and urged that special consideration be given to the export sector, which is an important vehicle to stimulate and grow the economy.