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Editorial: The JLP's high-wire act

Published:Friday | February 26, 2016 | 12:42 AM

Having won the Government in yesterday’s general election, Andrew Holness’ Jamaica Labour Party (JLP) administration has a tough, unenviable balancing act to accomplish. They have to deliver on their substantial, and potentially expensive, package of campaign promises, while delivering a balanced Budget and other tight fiscal targets if they are to avoid tensions with the International Monetary Fund (IMF), whose seal of approval remains important to Jamaica’s fragile economy.
For there is little doubt that the JLP’s path to victory was carved primarily out of its undertaking to remove personal income tax from people who earn up to J$1.5 million, even as it removes all fees in secondary schools and maintains and extends free health care. The JLP has also raised the prospect of doubling the minimum wage, which would also impact the Government’s wage bill, although it hasn’t offered a timetable for this.
These matters are important in the context of the outgoing Government’s agreement with the IMF, and the JLP’s past relationship with the Fund. The agreement still has a year to run. And, despite past disparagement of the deal, and the previous Government’s faithful adherence to it, the JLP says it is committed to the agreement.
That means that the Government, even after last year’s reduction by a half of a percentage point, will have to run a primary balance of seven per cent of gross domestic product (GDP), rein in a national debt that, four years ago, was nearly 50 per cent of GDP, but which has since declined by more than 20 percentage points.
The JLP insists that it can pay for its tax give-back ­ whose design and efficacy many people dispute ­ by a shuffling of existing taxes, and from the growth the measures will stimulate. The IMF, however, may well demand upfront, bankable evidence that all financing gaps are closed, including those that will be created by its other promises.
Part of the background noise here will be the collapse, in 2010 after only one review, of the previous JLP Government’s agreement with the Fund and the fact that Audley Shaw, the incoming finance minister, was on the job at the time of that derailment.
The bottom line is that while Mr Holness seeks to satisfy the expectations that are behind his mandate, his Government will have to calibrate carefully and not push Jamaica back into a situation of unsustainable debt, which would undermine the fiscal and macroeconomic stability over four years of hard, often painful, slog.
The PNP’s defeat in this election clearly brings into question, and possibly to an end, the leadership of Portia Simpson Miller, the party president and outgoing prime minister, as the party searches for renewal in the face of voter apathy as was reflected in the unofficial 47.6 per cent turnout. The transition, in our view, should happen sooner rather than later.
Peter Phillips, the finance minister, four years Mrs Simpson Miller’s junior, still harbours ambitions of leading the party. If he is so inclined, he would seem to be the natural successor.
Dr Phillips speaks often to the causes of political alienation and new approaches to governance and, in the medium term, could inspire the PNP to fresh, deep thinking on these matters until it settles on a new-generation leader.