Mark Ricketts | Hard road to recovery
Some days the number of people being tested positive for COVID-19 are encouraging, between zero and three; other days, disheartening, between seven and nine. With churches and bars opening, likely avoiding the spirits in the dark, and tourism being pressured to open soon, there is renewed buoyancy that the worst is behind.
Telltale signs of the country stepping out: the roads are more congested, and the Mandela Highway is already bumper to bumper in rush-hour traffic. The prime minister’s forthright announcement that on May 31 the stay-at-home measure will end, is music to the ears of those who will celebrate it as their day of liberation.
For many persons, freedom is allied with optimism as they see things quickly coming back to normal: hotels reopened, beaches jam-packed, cruise ships in port, Bernard Lodge Development under way, agriculture in bloom, and entertainment in full swing.
However, with the coronavirus still around, concerns are expressed about public transportation from June 1 and parents denied options to stay home, likely with their stay-at-home children. When one looks at how the society is structured and how it functions, recovery won’t be easy and the country should have gone to the International Monetary Fund (IMF) sooner and requested four times the amount it got.
Last year, with good performance Jamaica ‘returned’ its Standby Arrangement of US $1.8 billion to the IMF. Surely it could have requested US$2.1 billion with agreed supervision, instead of the US$520 million under the Rapid Financing Instrument programme.
The Government was shortsighted in trying to appear prudent by penny-pinching; now it has to go to the capital market to raise high interest cost funds.
DEFICITS TO OVERCOME
There are too many infrastructural, social, behavioural, and financial deficits which must be overcome. The country should have used the dislocation in the economy to focus on how to rebuild, to retrain, to reprioritise, to digitise, to modernise so that, eventually, a new and more productive Jamaica, capable of repaying its debt and growing its economy, would emerge.
At present, 153,000 out of 170,000 hotel workers are laid off, more than one-third of the labour force is unemployed, and as I predicted, the Government is haemorrhaging money at a faster rate than it made provision for.
With bills piling up as repayment on deferred loans come due; with people talking bankruptcy and sales slow in some industries; with full salary for workers taking time to be restored and furloughed workers uncertain of work resumption; how will people cope, and who knows whether the $10,000 compassionate grant will be repeated?
Just imagine, it was like yesterday that the Government was implementing policy measures to strengthen the economy. It was making headway with employment gains, with record-breaking tourism arrivals and revenues, with a strong rebound in residential construction, and with improved macroeconomic stability.
Then calamity struck and kicked over everything. Putting Humpty Dumpty together again will be hard. Jamaicans, all of a sudden, might not be in the same boat but they are in the same storm, and “starting all over again is going to be rough, is going to be tough.”
In a moment of understandable frustration, Prime Minister Andrew Holness emphasised “if the country’s economy does not change gears and accelerate towards near capacity, the effects of the pandemic would be incalculable”.
He added, “The country was faced with a reality that we keep dancing around. A failure to kick-start the economy, which is projected by the IMF to contract by 5.6 per cent, could land the middle-class and poor Jamaicans in big trouble.”
The Jamaica Labour Party administration had anchored its theme on prosperity. Now, the pandemic has set back the country and the issues listed below mean putting it back together will be challenging.
1. Too much of Jamaica’s debt is denominated in foreign currency and whenever our currency devalues, more Jamaican dollars are needed to repay the debt.
2. Jamaica has wasted US$1 billion in just over two years to try and protect our dollar.
3. Foreign direct investment of approximately US$ 0.75 billion annually has been a boost for the economy. That has slowed; a rebound takes time.
4. Jamaica’s per capita income has always been depressingly low at around US$5,800 per annum. We trail everybody; The Bahamas, Barbados and St Lucia. Singapore, which started behind us, is now 10 times better. We simply have underperformed.
5. Remittances, the lifeblood for many, have fallen 30 per cent
6. Property taxes paid by high-end users are a joke and allow people to overconsume housing (building much larger houses than is warranted). For a third of the population are squatters, property taxes are alien. So, the rich and ascendant classes pay less than their fair share and those who are squatters, pay squat. The result is infrastructural deficit; gullies and drains not maintained, insufficient street lights, and once-beautiful areas, untidy and unsightly. With not much fiscal space, those are burdens.
7. The economy has a high level of foreign ownership in critical sectors, which it has benefited from. However, unnaturally high leakages (outflows of funds) as well as diversification to other countries because of asset maturities can be economically devastating during a crisis.
8. The education system and uneven parenting reinforce dismal training and certification levels, allowing horrendous levels of income inequality.
9. With a reported 250 out of 389 gangs active, murders over 1,000 every year, and a homicide rate that catapults the country in the top 10 worldwide, this means there are few countries like Jamaica.
10. The mix of political garrisons, social dysfunction, scamming, lawlessness, and rigidities in the labour market are impediments difficult to address overnight.
11. At 20 per cent, too many are below the poverty line.
12. The refusal of the Government to close underperforming entities drains the public purse.
The finance minister has provided multibillion-dollar payouts for employees in the tourism sector and for small businesses. However, with 500,000 persons unemployed and the ease with which crime, violence, and lawlessness manifest themselves, the contractionary Budget which slashed 38 per cent of the capital budget made no sense.
The Budget, during a pandemic, should have been expansionary to facilitate and stimulate massive retraining, resource reallocation, rebuilding, and the repositioning of human resources to maximise earnings and employment.