Editorial | Welcoming EPOC to new direction
It wouldn’t have been our preferred choice for the job in the changed circumstance. We, nonetheless, applaud the Government’s decision to enter an agreement with the Economic Programme Oversight Committee (EPOC) for the continued monitoring of Jamaica’s economy after the island’s standby agreement (SBA) with the International Monetary Fund expires in November.
It is, however, important that Keith Duncan, or whoever succeeds him as EPOC’s chairman, appreciate that the new environment will demand an adjustment in the posture of the committee if it is to continue to fulfil the obligation it accepted on the behalf of the people of Jamaica. Which is why it is important that the parties publish the text of the memorandum of understanding (MOU) they signed last week so that the public can be certain that the undertakings contained therein are what they would expect them to be.
At the same time, this arrangement by EPOC shouldn’t be used by the Government as a way around the establishment of an independent fiscal council, which we do not believe to be the intention of the finance minister, Nigel Clarke. In that regard, Dr Clarke should quickly provide bankable timelines for the law to create the council to be taken to Parliament and debated and when it will be in operation.
Over nearly seven years, across administrations, Jamaica has been in two agreements with the IMF, including the US$1.6-billion SBA, which concludes in three months’ time. Over that period, Jamaica has pulled back from a fiscal precipice, reducing its debt from nearly one and a half times GDP to under 100 per cent. For most of this time, the Government has returned a primary surplus of more than seven per cent of GDP, a clearly painful exercise achieved without social upheaval.
This costly pay-down of the debt has had the return of falling interest rates; sustained, though still slow, economic growth; low inflation; and relatively strong upswing in employment. Indeed, the unemployment rate of 7.8 per cent is the lowest in many decades.
A major contributor to these achievements was national consensus that was achieved around the economic reform project, which, in large measure, was led by EPOC, a mainly banking sector-funded body – comprising members of the private and public sectors and civil-society groups – that acted as a watchdog of the Government’s implementation of policies. They kept the Government honest.
The arrangement worked because EPOC, not unrelated to the fact that its first chairman, Richard Byles, the just-installed governor of the central bank, had the public’s trust. Mr Byles had a strong reputation to leverage as a successful and trustworthy private-sector leader.
This newspaper, like many other people, was concerned that conclusion of the SBA and the fading away of EPOC, in the absence of a new oversight mechanism, would be an opportunity for the Government to return to old, bad habits, including gourmandising on debt. The temptation would be worse as the country enters an election cycle and the administration attempts to buy over voters.
That is why this newspaper was increasingly worried as the end of the SBA approached and the arrangements for the establishment for a fiscal council lingered. The council is in danger of not being in place ahead of the general election due in early 2021. We, therefore, in the interim, proposed a staff-monitored agreement with the IMF, to which the Fund didn’t warm.
Happily, the administration appreciates that continued trust and confidence in its ability to stay on good fiscal behaviour required independent oversight, hence the MOU with EPOC. There, however, must be differences.
EPOC, up to now, has been largely focused on whether IMF benchmarks had been, or were likely to be, met based on the available data. Our expectation is that it will go further and set the tone for the kind of fiscal council this newspaper would like to see in place. In addition to reviewing the fiscal and related accounts, it should be a policy/financial arbiter, offering independent potential impact analyses on fiscal and other economic policies and programmes proposed by the Government.