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Jamaica has agreed to an intensive and extensive programme of monitoring and surveillance by the International Monetary Fund (IMF), to ensure that it meets the targets of the new loan agreement, Prime Minister the Hon. Bruce Golding said Wednesday night (January 13).
“There is data that we will have to transmit on a daily, weekly, fortnightly and monthly basis. We will be subjected to quarterly performance tests, with the first scheduled for March 31,” Mr. Golding confirmed in a national broadcast.
He explained that Jamaica will be required to introduce legislation to establish a Fiscal Responsibility Framework, in which the Government will have to present targets to Parliament, and will be held accountable for its performance in relation to those targets.
“So, it is not just the IMF that will be monitoring our performance; the Opposition, the media and the public at large will also be able to measure our performance. It is a “belt and braces” approach because, make no mistake, we can’t afford to deviate from this programme; we can’t afford to slip back into the ways of the past. Slackness, skylarking and failure are no longer options that are open to Jamaica,” the Prime Minister warned.
He said that the current economic climate has forced the Government to turn to the IMF and other multilateral institutions for help, to plug the hole resulting from the drop in foreign exchange flows and the fall-off in revenues.
Without that help, the exchange rate would fly through the roof and the cost of living would go on fast rapid, the country would not be able to meet its bills and essential Government services would have to be shut down, he said.
“It would lead to a catastrophe that is beyond description,” Mr. Golding said.
He noted that the IMF, World Bank, IDB and Caribbean Development Bank have collaborated to provide Jamaica with US$2.4 billion over the next 27 months. One half of that will be released over the next few months, once the IMF programme is approved. This will ensure that the dollar remains stable, that inflation is kept low, that the new lower interest rate regime that will emerge after the Debt Exchange is sustained over the long term and that the rates will go down even further.
Explaining the critical elements of the programme, Mr. Golding said the country must control expenditure and “cut our cloth to fit our suit.”
He said that the Debt Exchange Programme will save the country $40 billion a year in expenditure. The public sector wage bill will be frozen over the next two years. Provisions for retroactive payments due to teachers and the reclassification of nurses and other health sector workers cannot be paid at one time, and will have to be spread over the next few years.
He explained that the Public Sector Transformation Unit is working vigorously on the programme to reduce the size and cost of Government and the Government will start implementing the changes in the new financial year.
Some agencies and departments will be merged, cost management centres identified, responsibility and authority more closely aligned and performance targets and measurement established to ensure greater efficiency at lower cost. Travel expenses, purchases of goods and services, utility bills must all be reduced to specified levels.
Ministries and agencies will be required to report on a monthly basis all outstanding bills and commitments, so there is no build up in arrears that can eventually throw the budget out of line.
Waivers will be drastically curtailed. All existing incentives will be reviewed and where they are no longer necessary, they will be withdrawn.
The Central Treasury Management System will be established to bring all of Government’s financial resources under central management to ensure better utilisation.
Implementation of the Tax Administration Programme will also be accelerated. Adjustments will be made in Property Taxes on April 1. The level of adjustments will be tempered by an aggressive drive to collect property tax from those who have not been paying.
“We are going to get tough. We will use our powers to advertise for sale those properties whose owners refuse to pay their tax,” he said.
The main focus of the Tax Administration Programme will be enforcement and collection. People who owe taxes must pay their taxes! It is more TAXES we want – not more TAXATION, he declared. Fiscal burdens that have worn down the budget will be removed.
Mr. Golding also announced:We have improved efficiencies at the JUTC but bus fares will have to be increased to reduce the losses even further and lessen the burden on the budget; We expect, shortly, to conclude the sale of Air Jamaica which incurred losses last year of $9 billion; We are negotiating the sale of our shares in Clarendon Alumina Production to remove the burden of production losses caused by the forward-sale contract of 2005 which is costing us almost $1 billion per month; We are seeking to refinance Highway 2000, from which we earn no revenue but which is costing us almost $3 billion in annual interest payments; We are still optimistic that we will be successful in divesting the rest of the sugar factories and estates because, let it be clear, the Government will not be able to cover any more losses in the sugar industry and I have given clear instructions that no such request will be entertained by the Ministry of Finance; We have appointed an enterprise team to proceed with the privatisation of the Norman Manley International Airport; We are pursuing real, live options to finance the new Petrojam refinery in a way that will require no financial contribution or guarantee from the Government, since we will not be in a position to do so. Discussions with our Venezuelan partners and possible sources of finance are being actively pursued and a joint Jamaica/Venezuelan team is to travel to Japan shortly in that regard; We are negotiating to sell our shares in JPS, so that we can pay down some of our debt.
He added that many other public assets that are not essential to Government’s core functions will be sold as soon as the market can absorb them.
“We want a leaner Government structure that is able to direct all its energies and resources to performing properly the essential functions of Government,” Mr. Golding said.