Minister of Finance and the Public Service, Hon. Audley Shaw says with the economy now stabilised, it is time to focus on issues of productivity, production, savings and investment in order to stimulate further growth.
Speaking at the 11th annual Shirley Playfair Lecture at the Jamaica Pegasus Hotel, in New Kingston, on September 9, Mr. Shaw said that critical to a stable macro-economic environment is a sound financial system.
The Minister argued that the current stability should provide a launching pad for investment, employment and growth.
Minister of State in the Ministry of Industry, Investment and Commerce, Hon. Michael Stern (right), in discussion with Chairman of the Fair Trading Commission, Dr. Derrick McKoy, at the 11th annual Shirley Playfair Lecture at the Jamaica Pegasus Hotel, in New Kingston, on September 9.
Mr. Shaw pointed out that the Bank of Jamaica Act is being amended to vest in the Central Bank, the responsibility for overall financial system stability, and that the financial sector reform process will also stimulate the expansion of the types of investment vehicles available to individual savers, thereby expanding the pool of loanable funds for the productive sector.
“Jamaica needs to generate sustained growth in excess of three per cent per year over the medium-term, to allow for an improved standard of living for all its citizens,” the Minister emphasised.
Mr. Shaw said that given the low interest rate environment that has ensued following the successful completion of the Jamaica Debt Exchange (JDX) and the signing of the Stand-by Agreement with the International Monetary Fund (IMF), the maintenance of low investment-friendly inflation is a necessity if the government’s financial planning is to bear any real fruit.
He argued that low and stable inflation will engender the expectation that the returns on investments will be more predictable and savings will maintain their purchasing power.
Minister of Finance and the Public Service, Hon. Audley Shaw right) is greeted by President and Chief Executive Officer of the Bank of Nova Scotia Jamaica Ltd., Bruce Bowen, at the 11th annual Shirley Playfair Lecture at the Jamaica Pegasus Hotel, in New Kingston, on September 9.
“Businesses will be able to plan with greater certainty, thus minimising the wild fluctuation in consumer prices,” he noted.
The Minister said that over the last 15 years the country has recorded average annual growth of just 0.7 per cent, and given the size of the domestic economy, it is clear that the transition to a strong and sustained growth has to be led by the productive sector, in particular, the exporters.
He further asserted that the highly commendable embrace of the JDX signals that Jamaicans are willing to embrace bold and daring measures in the national interest.
“The JDX represented a voluntary par-for-par exchange of domestic bonds for longer dated, lower coupon instruments. The new instruments have provided liquidity; are now facilitating greater trading of securities and contributing to the development of the domestic financial markets,” Mr. Shaw said.
He said that in addition, the significant reduction in the Government’s refinancing needs is serving to ease the “crowding-out effect” of Government debt and the upward pressure that this had placed on domestic interest rates.
The Minister noted that the interest rates on Government paper and on Central Bank deposit instruments are at a 33-year low.