By Al Edwards, Business Co-ordinatorMINISTER Of Finance and Planning, Dr. Omar Davies, is projecting that for the fiscal year 2003/2004, a deficit target of between five and six per cent will be met.
Speaking during an address to the Kiwanis Club of Kingston on the economy at the Hilton Hotel, New Kingston yesterday, Dr. Davies said: "A passive forecast of the fiscal would have put us at 8.4 per cent of GDP (Gross Domestic product) coming up to March 31. We felt that wasn't adequate and we have targeted eight per cent. It is not possible to do more unless you are going to bring about severe disruption. What we have is a firm commitment to bring the fiscal back in balance in a three year period. Today (Tuesday) I'm going to say in Parliament for the first time that for the fiscal year 2003/2004 we are going to have a fiscal deficit of between five and six percent. It is going to be tough but it has to be done and in the subsequent two years we are going to eliminate that deficit and have a balanced budget in 2005/2006."
How will he accomplish that?
He plans to widen the tax net and go after those, as he euphemistically puts it, "who are not contributing their fair share and get them aquatinted with Mr. Clive Nicholas (Head of the Tax Department)."
He said he had noted that at times the Government service was not friendly toward prospective taxpayers and that the level of bureaucracy was daunting. He said that steps had to be taken to make payment of tax much more consumer friendly.
"There are clear things that need to be done to control expenditure and everyone will experience that it will be a lot tighter with Government expenditure and at the same time there will have to be an increased collection from those who are not now in the tax net," he said.
The Minister admitted there were problems in the foreign exchange market but that efforts have been made to address those. He said the Government did not run a fixed exchange rate policy and, although there could be movements, he insisted they must be orderly.
"We will not allow speculators to dominate the market. I can tell you of persons who have been just borrowing Jamaican dollars to purchase American dollars so that by tomorrow they are going to sell it back at a profit, that has to be crushed. I say that without any rancour, it won't be tolerated. A whole country can't be held to ransom by a set of persons whose only mission is not to produce but to hustle on the margins," Dr. Davies said.
He said the Bank of Jamaica sold significant amounts of US dollars into the market to cool things down and that was not effective. It took the further measure of imposing a five per cent special deposit on the deposit taking institutions, which initially had some positive effect but did not prove to be a potent enough panacea.
Referring to the move to prevent the further slide in the Jamaican dollar and therefore raise repo rates from 18 to 30 per cent, he said that many people would feel that it was draconian but "if you have an infection and you take antibiotics and that proves ineffective then you need to take a stronger dose of medicine to cure the infection. Everybody wants to go to heaven but no one wants to die. We want the market to be cool but people want it to be done painlessly, which is not possible. I think we have caught the attention of the speculators. On Monday, the movement was in the right direction."
Dr. Davies said "the move to introduce a 150-day reverse repurchase instrument will not be kept in place for one hour or one day more than necessary but order has to be restored to the foreign exchange market. No one can plan in a state of unpredictability and this can't be allowed to continue."
