Mon | Sep 24, 2018

Letter of the Day | EPOC's concerns misplaced

Published:Monday | August 15, 2016 | 12:00 AM


The August 13, 2016 edition of The Gleaner of carried the headline '$16 billion more needed for Holness tax break, EPOC concerned'. The Economic Programme Oversight Committee's (EPOC) expression of concern, if genuine, is ill-timed and insensitive.

The Government, just three days ago, approached the capital market to sell bonds, presumably to refinance some US$1.15 billion of current high-interest debt and to provide some level of financial cushion for the near to medium term. Is this the right time for a body such as EPOC to be raising concerns, especially when such concerns are arguably misplaced, and when the very notice of such concerns could affect the pricing and success of the Government's bond offering? I think not. Whose interest is being served here? Is it Jamaica's?

EPOC's concern, if genuine, has seemingly ignored the following:

1. The economy is already picking up some steam and should see growth of at least 2.5 per cent in 2016. A number of publicly listed company results for the first half of 2016 are already reflecting increased domestic volume demand for their products. Carib Cement has seen a 27 per cent increase in domestic volume sales. The much smaller Jamaican Teas is showing a 24 per cent increase in local sales. This should be telling somebody something. In an environment of low inflation, these increases are significant. There is significant loan growth in the financial sector. Confidence has returned and is increasing.

2. A primary surplus target of $26.8 billion in three months was achieved against a target of $11 billion. This is the biggest news. It is big, big. It reflects that revenue is performing way above expectations. If that trend continues, Jamaica's primary surplus for the fiscal year will be at least $30 billion above target. With that momentum, finding $16 billion to pay the increase will be no big deal.

3. The IMF programme that requires a 7% primary surplus target comes to an end in March 2017. No other country in the world is required to maintain such a high level of primary surplus. Quite frankly, a 5% primary surplus is more than sufficient. With the momentum that is developing, there is no reason why the economy should not grow by at least 3% in fiscal year 2017-2018, and provide the revenue to fund the reduced tax-threshold obligations.

4. The courts have ruled on the legality of changes to the law governing the National Housing Trust, which allowed Government to extract $11 billion per year. Although this extraction comes to an end in 2016-17, it would be a simple matter to extend it, but this, I think, will hardly be necessary.

Jamaica is on a track that may be leading it to the best years of sustained economic growth for 40 years. That is the most welcome news. EPOC may have its concerns. I have none.