No random provision of jobs with primary surplus savings
The expected J$4.5 billion savings from the reduction in the primary surplus target are expected to be used to fund specific capital projects to boost growth rather than providing jobs willy-nilly, according to the agreement between the previous Government and the International Monetary Fund (IMF).
The IMF reduced the primary surplus target under its economic support programme with Jamaica from 7.5 per cent of gross domestic product (GDP) to 7.25 per cent for fiscal year 2015-16 and to 7.0 per cent for fiscal year 2016-17.
"What they did in saying that was to say, however, we want you to invest in these capital projects. The Government had to come with a list of capital projects that it was going to put that quarter per cent in, so they weren't at liberty to just give out work. They had to put those funds in capital projects like irrigation, farmworks and some others," co-chairman of the Economic Programme Oversight Committee, Richard Byles, said at a briefing ahead of the recently held general election.
He noted that the quarter per cent savings next fiscal year will provide "a little more room" for the Government to put such funds into "those kinds of projects again."
Byles indicated that he was aware there is need for the rehabilitation of roads, for example, saying the infrastructure is really atrocious and it needs resources in order to facilitate business to go ahead.
"So Jamaica has a long list of capital projects it should invest in, in order to spur growth more and more," Byles said.
Referring to the exogenous shock of drought, he emphasised that "we have to irrigate more of our farms, otherwise, we are going to be at the whim and fancy of the weather, and that's not a good thing for growth. Agriculture is the single largest employer of labour in this country, and you can't have that up-and-down with the weather - we have too much rain, we have too little rain. You have to have agriculture that is more scientific and technological in order to edge against the vagaries of the weather."
While noting that the nine per cent of GDP wage bill target under the programme is not expected until the 2017-18 fiscal year, Byles said meeting it will be a struggle.
But he said there is a strong case for the Government to say to the IMF that the country has been running inflation so low, which is a positive for many other aspects of the economic recovery programme, and so that needs to be taken into account in setting a realistic wage to GDP target.
The wage to GDP is not an indicator that is as important as the primary balance or the Net International Reserves (NIR), he said.
"It's a commitment that was given by Jamaica, and even if it is not a primary target, it's a commitment that we should live up to to the best of our ability, and the IMF would expect us to, but I would expect the IMF to give consideration to the impact of lower inflation on that target," Byles added.
"Failure to meet the primary balance or the NIR would immediately require either the programme to be renegotiated or for the IMF board to say that I give a waiver because there are conditions that I understand made you fail. Failure to meet that (wage) target doesn't rise to that level of importance," he said.