Pension strain - Gov't 'happy but not celebrating' IMF approval; PM seeks partnership on reforms
Reform of the public pension system will be one of the main pillars of the Jamaica Labour Party administration as it seeks to consolidate and build on the economic gains achieved during the last quarter under the International Monetary Fund (IMF) standby agreement, for which it got excellent grade from the fund.
Prime Minister Andrew Holness warned of the need to maintain strong fiscal stewardship of the economy, especially in light of the progress made.
"I am pleased to say that we have met our structural benchmarks and passed our qualitative performance criteria for the quarter ended December 31st. However, though we are happy, I am not celebrating," the prime minister disclosed during the joint press conference with the IMF at Jamaica House.
Could derail the fiscal achievements
He went on to identify the ongoing drain on the economy by the public pension scheme as a singular factor which could derail the fiscal achievements for which the IMF gave it accolades.
"The standby is off to a strong start. Programme conditions through December were met and the tax revenues and international reserves are all exceeding expectations. The structural reforms are also taking hold," Uma Ramakrishnan, lead representative for the IMF told the press conference.
"With seven consecutive quarters of positive growth, the Jamaican economy is on track to reach a growth rate of about 1.7 per cent for this fiscal year. And for the next fiscal year, we expect it to continue growing to a little over 2 per cent. Employment is also steadily improving, even though the unemployment rate remains high, but that also partly reflects the expansion in the labour force itself," she explained.
However, Holness remains guardedly optimistic, insisting that his administration would remain vigilant in light of the need to "see reality for what it is, to balance priorities and, in the area of public finance, to be prudent and responsible".
"So we are very happy that we have emerged positively from the review, but I want the nation to still maintain a level of sobriety ... . We are not yet out of the woods and fiscal discipline must be maintained. Indeed, the Government has to evolve to a point where it is able to get almost full control over the fiscal environment to ensure that we are making the right fiscal decision, and I keep stressing that word, the right management of public finances.
... 'Pension payments could consume Budget'
Prime Minister Andrew Holness said that public sector pensions reform has to be inclusive. His government would therefore seek dialogue with stakeholders including the unions in achieving this.
"We have to put Jamaica on a path of fiscal sustainability. It is in that context that the reform of the public pension system is an imperative, a necessity. The current public pension system is unsustainable. Pension payments have ballooned in recent years and the projections show that they could consume the Budget in a few years if we do not reform now," the prime minister admitted. "This reform has to be done in a cooperative way. It has to be done in an inclusive way, and in discussion with the minister of finance and the minister of state, Rudyard Spencer, we will intensify our outreach and dialogue and cooperation with our partners in the unions so that we can reach a solution in Jamaica's best interest."
With the serious threats to the economy from the spiralling crime and health issues, even though the debt to gross domestic product ratio is moving in the right direction, it is not yet time to celebrate according to the prime minister.
He explained: "Jamaica still has to meet the seven per cent primary surplus target, so the fundamentals of our economy, while it is changing, while there is great optimism, while we're seeing the sign that things are improving, we're seeing growth for several consecutive quarters, we are still a high-debt economy. That fundamental has not changed and, therefore, the Government still has to maintain the same, if not higher, levels of fiscal responsibility, and I want to stress that point, that some measures which were incorporated in the last programme are also required in this programme."