Editorial: Good going, Dr Phillips
If Peter Phillips' declaration does, in fact, represent the solemn commitment of the Simpson Miller administration, this newspaper feels better about Jamaica's economic future at the end of the Budget Debate than when he started the exercise a month ago. It has to do with the finance minister's pledge to stay the course with the International Monetary Fund-backed economic policies.
This, of course, is not new, having been made in the past by Dr Phillips and implied by other government officials, including Prime Minister Portia Simpson Miller. But the context within which it has been reiterated is important.
Maintaining a primary surplus of 7.5 per cent of gross domestic product (GDP), which the Government has done over the past two fiscal years and which it is committed to doing for at least two more, is not a politically easy undertaking. It has, in Jamaica's case, meant additional tax packages worth more than J$80 billion in the past three Budgets, and a crimping of government spending, including a freeze on public-sector wages.
Such actions are, perforce, contractionary, especially in an environment where low confidence in, and lack of predictability about, Government's policy behaviour undermined private-sector investment. It didn't help that the Government gourmandised on debt, thus crowding out private borrowers.
Reversing the effects, including only marginal growth in GDP, of more than four decades of bad fiscal behaviour will take much time. It ought not to be unexpected, therefore, that there would be a lag between greater prudence and its translating into confidence, investment, job creation and faster economic growth.
But the administration is not without things to show for the effort: a near balanced Budget; a debt-to-GDP ratio that is trending downwards; the current deficit has, over three years, declined from 13 per cent of GDP to low single digit. There is, too, nascent growth in the economy.
Indeed, there is little doubt, as Prime Minister Simpson Miller claimed in the Budget Debate, that having undertaken the reforms and passed the IMF tests, "Jamaica is in a better position than it was three years ago". But that doesn't mean the programme can't go off the rails, especially if the Government feels pressured from the Opposition's ridicule for "passing IMF tests" while Jamaicans hurt, with a new election cycle on the horizon.
Mrs Simpson Miller's remarks might have been interpreted as signalling her support for staying the course. Peter Phillips, however, was explicit.
He said: "This administration is going to continue honouring its commitments and meeting its obligations to our international partners, in order to make sure we pass our tests and establish a viable base for economic growth."
While incentives and specific government-led projects and/or infrastructure expenditure generate economic activity, the greatest and most sustainable inducement to investment and growth is macroeconomic stability and market competitiveness, which the reform project is designed to undertake and is showing signs of achieving.
Should anyone believe that Jamaica has options, we suggest they look at Greece. As a member of the European Union and of the Eurozone currency union, Greece has far greater insulation than Jamaica. But as Prime Minister Alexis Tsipras and his left-wing Syriza party - which came to power pledging to end austerity and expecting debt write-offs - have discovered, there are no free lunches. Not even for members of wealthy clubs.