Editorial | Optimistic about Jamaica
As Jamaicans take stock of the old year and assess the prospects for the new one, this newspaper remains, with caution, optimistic about the country. At least, about the economy.
Indeed, in the 10 months it has been in office, the Holness administration has done little, on this front, to cause major concern. Early on, the Government recognised, in the context of Jamaica's fiscal problems, the imprudence of its campaign promise to return to employees J$32 billion in income tax payments without compensatory funding.
So, instead of immediately moving the income threshold to J$1.5 million, they decided to do it in two tranches, implementing the first million dollars, and only for nine months of the current fiscal year. Critically, the give-back was covered by J$13 billion in new taxes, primarily on petroleum purchases.
For the new fiscal year, when the rest of the income tax undertaking falls due, and its full cost will range over the entire period, the shortfall to the Government's coffers will be offset by an additional J$16 billion in new taxes, which the administration has suggested will come mostly from hike in property rates. This is separate from any additional taxes that will be required to help the Government meet its expenses.
Like its predecessor, the administration has tightly managed the fiscal accounts, thereby achieving the primarily surplus of seven per cent of gross domestic product (GDP), to which Jamaica is committed under its previous and current agreements with the International Monetary Fund (IMF). Further, as a declaration of its commitment to the fiscal discipline of the previous four years, the administration entered a new agreement with the Fund to subsume and succeed the one that would have been completed this March.
The upshot of all of this is that macroeconomic stability has begun to take firm hold. Debt is continuing to inch down; inflation is low; the current account, having declined sharply in recent years, continues to be moderate; and the exchange rate is broadly competitive and relatively stable. There is, too, the bonus of good weather that has benefited domestic agriculture.
The upshot of all this is improving confidence and investment. Economic growth this fiscal year could reach two per cent, with the possibility of doing better in 2017/18 and beyond.
But there are dangers that could slow, if not derail, these positive developments. The most obvious of these is Jamaica's old and resurgent problem of violent crime, which experts say already costs the country several points of GDP annually.
The Government has signalled its intent to invest heavily in citizens' security and justice, but is yet to offer specifics of its policies and strategies in that regard. This should happen quickly.
Further, the Government must accelerate the reform of the public sector to reduce bureaucracy and constraints to doing business. It must also move with greater urgency with the divestment of government enterprises to free resources which can be employed to the core functions of the state.
Despite the achievements thus far, there is still much hard slogging left in the reform project, and success ultimately depends on maintaining a consensus around the programme. That is a political undertaking and the ultimate test for Prime Minister Andrew Holness and his Government.