Reversal of Low Growth Objective of Reform Agenda – Finance Minister

Minister of Finance and Planning, Dr. the Hon. Peter Phillips, says the ultimate objective of the country’s economic reform agenda is to reverse the long term trend of low growth and declining productivity.

“The challenge for us as a Government, with the support of the Jamaican people, is to go beyond the strict confines of the Extended Fund Facility (with the International Monetary Fund) to create an economic and social environment, which encourages and facilitates investment and induces long term innovation and productivity gains,” the Minister said, as he opened the 2013/14 Budget Debate in the House of Representatives on April 18.

“We also need to create a public sector that treats our citizens well, so that they spend less time in government offices and more time in productive work. Equally, we need to reduce the size of the public sector and improve its efficiency,” he said.

Dr. Phillips said the success of these initiatives will require investors operating large or small businesses as well as individual workers in the public and private sector to: enter into a binding covenant with the government to ensure that all taxes that are due are collected; ensure that there are no cost overruns on public contracts; give a fair day’s work for a fair day’s pay; and to give quality service to citizens from whom voluntary tax compliance is expected.

He said the economic reform programme, of which the Extended Fund Facility forms a part, is not the Fund’s programme.

“It is Jamaica’s programme, which we need to embark on in order to correct the imbalances which have been a feature of our economic environment for a number of years,” the Minister said.

“Left to ourselves, there are areas of the Fund programme that we would have cast differently, but we had no such options. In our circumstances, we acted in a manner that left no doubt about our resolve to: reduce the debt; reduce the debt to GDP ratio; and secure the conditions most conducive to economic growth and job creation,” he said.

The Minister explained that without the IMF seal of approval, Jamaica would not regain access to either multilateral financing or financing at favourable terms from the private financial markets.

He said in due course, after the IMF Board’s consideration, the details of the Letter of Intent will be presented to the House of Representatives.

“Nevertheless, the objectives are well known. One of the central objectives is to reduce the debt to GDP ratio, which is in the region of 140 per cent (using the IMF estimates) to 95 per cent of GDP by 2020; reduce public sector wages as a share of GDP to nine per cent by 2015/16; achieve the quarterly quantitative performance targets; and

undertake important structural reforms, including implementation of a Central Treasury Management System; and strengthening the tax administration and fiscal responsibility frameworks,” Dr. Phillips said.

He said the budget has been cast in the context of an agreed four-year Extended Fund Facility with the IMF.

“It is well known that following the Staff Level Agreement arrived at in February, there was a delay in going to the Executive Board because of the request from the Fund to have discussions with some of the multilateral institutions, especially the Inter-American Development Bank (IDB) and the World Bank,” he said.

Dr. Phillips said while there can be no doubt that the delay certainly had a negative impact on confidence in Jamaica, the end result was nevertheless that additional resources will be provided by the Fund, the IDB and the World Bank.

“The IMF increased its commitment from 175 per cent of quota to 225 per cent of quota or approximately US$958 million, an increase of US$200 million. Simultaneously, the IDB and the World Bank have confirmed a minimum commitment of slightly more than US$1 billion,” he said.

By Chris Patterson, JIS Reporter