The Inter-American Development Bank's, (IDB) recent country report on Jamaica, on which the Financial Gleaner reported on Friday, implied serious structural problems in the economy requiring urgent attention.

Indeed, it is imperative that the Finance Minister, Dr Omar Davies, and his boss, Prime Minister Simpson Miller, speak to the issues, to assure Jamaicans that, as may be adduced from the IDB report, the Government is not choosing a path that appears easy rather than the one that is prudent.

The issues raised by the IDB relate primarily to its possible need to shelve loans to Jamaica because of the failure to allocate in its annual budgets matching funds for agreed projects, so that they can be completed "within a reasonable time". The upshot has been, according to the bank, "slow project execution and extended project lifetimes", contributing to higher administration and financial costs. Indeed, we all know the drill.

For the past several years, the Government, for the most part, has had to cut back in spending on capital projects as it responds to crimping public sector deficits, ballooning current obligations and mountainous debt servicing requirements. These obligations mean that the Government can spend less on projects to enhance the infrastructure - the kind of things for which the IDB mostly lends. Indeed, these are the things that are necessary in building a modern, productive economy involving schools, highways, power plants, water systems and so on.

Part of the problem, of course, is that at crucial periods the Government has failed to take, or has overturned, the hard decision. Take the case of public sector employment, which has been on a sharp growth path over the 1990s.

Three years ago, in the aftermath of pre-election pay hikes and other budget-busting spending, it was clear that the Government could not sustain its public sector wage bill. Rather than doing the prudent thing of cutting jobs, reducing the work force to manageable and efficient size, the Government contrived with unions to implement a wage cap.

The deal ostensibly saved 15,000 jobs and slowed the growth of the wage fund. But the real impact of the arrangement was to institutionalise public sector inefficiency, with people performing at the competence of their pay levels. A smaller, better paid, brighter and motivated public sector would make better sense to us; and in the end likely to be more cost-effective.

The fiscal gains achieved by delaying the prudent decision are, at best, temporary. In a year-and-a-half when the current pay agreement expires it is hardly likely that the Government will be able to negotiate a new one.

The IDB makes another critical point. The Government - which ran up a huge national debt in its efforts to build reserves and support an exchange rate which many insist was overvalued - has found it easier to borrow on the international money market rather than face slower "operational pace and rules and procedures of the development banks". Moreover, flawed government policy has meant that the administration was in greater need of general rather than investment financing.

The result of this is that the country has been faced with higher debt-serving costs than if we had borrowed from the IDB or the World Bank, but without the infrastructure to show for the debt.

THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY RELECT THE VIEWS OF THE GLEANER.