Editorial | Matters for the prime minister

When Prime Minister Andrew Holness speaks in the Budget Debate this week, there are two issues which this newspaper wants him to place on his list of priorities to be addressed. And, preferably, he should do so before Thursday.

First, with a tact and skill that doesn’t undermine her authority or suggest schisms in his administration, Dr Holness must walk back Finance Minister Fayval Williams’ ill-advised remarks about the Middle East war, global oil prices and the potential impact on Jamaica. Ms Williams, unintentionally perhaps, left the sense that Jamaica will emerge largely unscathed. While The Gleaner hopes that will be the case, it is unlikely to hold true, especially if the conflict is prolonged.

The second matter is that while Julian Robinson may have exaggerated the pace at which the system could be implemented – especially at scale – the prime minister should indicate that the Government has embraced the shadow finance minister’s suggestion for the implementation of an electronic invoicing system that gives the tax authorities a real-time handle of what is due them in general consumption tax (GCT) on sales and other business transactions. Indeed, Dr Holness should say that he has already ordered Tax Administration Jamaica (TAJ) to proceed with the project and that Ms Williams will soon take to Parliament the necessary regulations for the implementation of the system.

It is understatement to say that this newspaper was surprised at Minister Williams’ response to the United States’ and Israel’s attack on Iran a fortnight ago and the war that this has unleashed. The finance minister’s absence of caution and perspective was uncharacteristic, counterintuitive, going beyond what was necessary to portray order and promoting calm in the economy.

OIL IMPORTS

On average, Jamaica imports around two million barrels or oil or oil equivalent. In 2024, based on the latest official data, the country spent over US$1.9 billion for its petroleum imports. The average price for West Texas Intermediate crude (WTI), as applied by the Government in its budget analysis for the 2024-25 fiscal year, was US$74.4 per barrel.

Based on figures in the government’s fiscal policy paper for 2026/2027, the government projected that oil price will hover at US$60 per barrel for not only this fiscal year, but in the next too. In other words, in this fiscal year oil prices were projected to be 3.5 per cent lower than the year before.

However, since the outbreak of the war oil prices have rocketed. The benchmark Brent crude closed on Friday at US$103.14 per barrel, up 40 per cent since the start of the war. West Texas crude was US$98.71 per barrel. Brent has been as high as US$120 pb.

Part of the problem for the steep upward spiral in the price of oil is that Iran has been able to choke off the Strait of Hormuz, the narrow gap between the Persian Gulf and the Gulf of Oman through which around a quarter of the world’s seaborne oil passes. Moreover, Iran and its allies have threatened shipping in the seas around the Gulf states.

Indeed, the International Energy Agency (IEA) said the war has “created the largest supply disruption in the history of the global oil market”.

DEEPLY ROILED

Even with the decision of IEA members to release 400 million barrels of oil from their emergency stockpiles to help offset the disruption and America’s temporary lifting of sanctions on Russian oil, markets remained deeply roiled. They are also unconvinced by US president Donald Trump’s assurances that the conflict will be over quickly, apparently with US’s effective control over Iranian oil.

Additionally, the prevailing view of analysts is that even if the war ends relatively soon, oil prices will settle higher – at least for a considerable period .

Yet, this is what Ms Williams, the finance minister, said when she opened the Budget Debate last week: “...The war in the Middle East has layered another risk in terms of rising oil prices on Jamaica. I want to say to the Jamaican people and businesses, you can continue to have faith in this government. We have built the largest net international reserves [NIR] of any government. Madam Speaker, the NIR stands strong at US$6,839,000,000 as of March 5, 2026.

“If we take the gross (rather than the net reserves) and measure it in weeks of goods and services imports, that would be 36 weeks, based on the official figures the Bank of Jamaica published. The global international benchmark is 12 weeks, meaning, it’s considered adequate for a country if its gross reserves covers 12 weeks of goods & services imports. Jamaica has 36 weeks. Our NIR is strong!”

It is good that the minister acknowledged the risks posed by rising oil prices. And in the context of where Jamaica used to be (up to the mid 1990s Jamaica’s NIR was minus US$800 million), the island’s reserves may be, as the finance minister put it, “strong”.

Her analysis, nonetheless, oversimplifies a complex situation and has the danger of sending to Jamaica a signal that there is little to be concerned about. Indeed, the higher price of oil is not the only potential fallout for the Middle East war, there are risks, too, of other global supply chain disruptions that could lead to increased prices of everything from food, to motor vehicles and technology equipment. Moreover, higher oil prices will inevitably work their way through to the domestic supply chains, impacting goods and services, at a time when Jamaica is trying to recover from the devastation of Hurricane Melissa over four months ago.