Editorial | Get cracking with the fiscal council
It’s not long now, by the end November, until Jamaica’s 36-month Stand-By Agreement (SBA) with the International Monetary Fund (IMF) comes to an end. The SBA, which provides the Government with a US$1.7-billion insurance policy against exogenous shocks, superseded the Extended Fund Facility, which was in place from 2013, but was cut short by the Holness administration.
It is common ground that in the latest iteration of their relationship, the IMF’s tutelage has been good for Jamaica. For the last seven years, across administrations, starting with the big 2012 tax package as a precondition for IMF loans, Jamaica has made major strides in transforming its economy. By 2011, with the Government having the previous year crashed out of its agreement with the IMF, Jamaica was teetering at a fiscal cliff. The national debt was barrelling towards 150 per cent of gross domestic product (GDP) and the country was all but locked out of global financial markets. Private lenders, willing to assume Jamaica’s debt, demanded substantial risk premiums. Multilaterals insisted on the IMF’s imprimatur before they entertained Jamaica.
Times have changed. The debt is now 96 per cent of GDP. The Budget is balanced. Inflation, at around four per cent, is, by Jamaican standards, low. Unemployment, at eight per cent, is the lowest it has been for decades. Growth, though struggling to get past two per cent, is among the best for a long time and heading in the right direction. Business and consumer confidence is robust.
The big contributor to this turnaround is the discipline that allowed the Government to, over the period, maintain what, by international standard, have been humongous primary balances – starting at 7.5 per cent of GDP, and currently at six per cent.
IMF oversight, of course, helped impose good behaviour by potential errant policymakers. But the Fund’s influence doesn’t diminish and is perhaps secondary to that of the home-grown Economic Programme Oversight Committee (EPOC), whose replication is promoted by the IMF. EPOC, particularly under its first chairman, Richard Byles, especially in the early period when national consensus around the reform project was critical, elicited public confidence.
WE BELIEVE IN SYSTEMS
This trust isn’t without context. In Mr Byles, people saw a successful and competent private sector leader who wouldn’t be corrupted by partisan considerations. Neither would he be gratuitously critical. Very important, too, Mr Byles and his committee were assured of, and had, timely access to critical data with which to inform their analyses and pronouncements. The post-Byles group has operated in similar fashion, although in less stressful circumstances.
This newspaper’s concern now is with what will happen after November when the SBA ends. Jamaica will no longer be under IMF strictures, EPOC’s mandate concludes and the Government and its fiscal management will be without formal and independent oversight.
We might trust the integrity of the Finance Minister Nigel Clarke, and believe that he won’t allow the Government to fall back to old habits. Unfortunately, we don’t. And it’s not because we doubt Dr Clarke’s integrity or question his commitment to managing the country’s fiscal affairs “in a thoughtful and disciplined way”, so that when the SBA ends and the IMF leaves, there is no reason for them to return. Rather, like Dr Clarke, we believe in systems.
That is why we agreed with the minister’s proposal, laid out a year ago, for a permanent and independent fiscal council, to be part of the fiscal accountability ecosystem. A fiscal council would operate like EPOC, except that it would be continuous, not limited to the oversight of an IMF, or any specific programme, and would be underpinned by law.
With less than six months to go to the end of SBA, there has been no outline of the proposal; no indication of the status of the law by which it will be governed, or how it is to be funded. That doesn’t bode well for trust. There shouldn’t be any leg between the end of the SBA and the establishment of the council. And it should be at work well before the next election campaign.