Growth and continued fiscal consolidation, the watchwords for 2015
Growth and continued fiscal consolidation will be key watchwords for the 2015/16 fiscal year as the Jamaican Government seeks to protect recent gains under the IMF Extended Fund Facility, says Finance Minister Dr Peter Phillips.
Phillips said Wednesday at the 10th annual Regional Investments and Capital Markets conference of the Jamaica Stock Exchange that the two items represent important challenges that had to be faced going forward if Jamaica is to fully benefit from the pain of economic adjustment programme under the EFF.
Phillips says the matter of fiscal consolidation takes on particular significance in light of the upcoming public sector wage negotiations, while reiterating his appreciation for the workers’ sacrifice under the wage freeze programme. He says a lot has been asked of government workers in recent years and is hoping for the same spirit of accommodation and restraint as parties sit down to hammer out a new wage deal.
“It is not reasonable to expect the same level of sacrifice nor do we expect to maintain that level of restraint (but) at the same time the resources available are not limitless and so we’re going to have to find a happy medium as we enter into those negotiations to ensure that at the end of all the restraint that has been exercised we don’t end up throwing away the gains that have been made thus far for the economy,” Phillips told conference participants.
The Finance Minister said that despite recent challenges such as the prolonged 2014 drought Jamaica is in line to meet the targeted growth range of up to 2% of GDP for the 2014/15 fiscal year. He says government is seized of the urgent need for higher levels of growth in a bid to overshoot the targets that have been set.
“One of things we have done in the first two years of the reform programme is to basically transform the incentive structure of the economy with a view, not to picking winners in terms of particular sectors, but to provide a beneficial environment for investment across all sectors,” he said.
He emphasized that given rapid technological transformation the question of sectoral growth ought to be left to market forces.
“It is foolhardy for state policy to simply focus on a particular sector and seek to imagine the future. It is much better to allow the market to identify the prospects and to seize the opportunities that can emerge from these markets” Phillips said.
He adds that Fiscal Incentives (Miscellaneous Provisions) Act 2013 and the Income Tax Relief (Large Projects & Pioneers and Industries) Act 2013 have transformed the tax incentive landscape by removing sectoral waivers and privileged exceptions and cut both the rate of taxation and bureaucracy.
“All of these initiatives are aimed at putting all the sectors of the economy on an equal footing and those with high levels of innovation are likely to benefit most,” the Finance Minister said.
By making these moves government has reduced the effective rate of taxation for most businesses except the financial sector, he added, while encouraging entrepreneurs to take advantage of the incentives and the more enabling business environment that he says it has facilitated.