Prime Minister Bruce Golding will understand the private sector if it says it feels bludgeoned and bruised.

We expect, too, that he'll empathise with those critics who might claim that Jamaica's economic policymakers are displaying an abject lack of imagination, or clear and visionary leadership.

Neither will PM Golding nor his finance minister, Audley Shaw, dispute an assessment that arrives at the conclusion that should things continue on the course that they are, the country's economy, already merely limping along, could well slow to a crawl.

The crisis, of course, is not all of Jamaica's making. For neither Mr Golding nor Mr Shaw initiated America's sub-prime credit crisis and its off-springs, the global credit meltdown and the international recession. But the administration has been slow to respond, indecisive in its action and the instruments so far employed have been largely blunt.

Defending the currency

The job, up to now, has mostly been left to the central bank, which, in keeping with its mandate, is primarily focused on defending the currency and battling inflation.

So, faced with a Jamaican inflation rate that is nearly 50 per cent ahead of target and a Jamaican dollar that has tumbled over five per cent in under two months, the Bank of Jamaica's governor, Derick Latibeaudiere has become the enforcer of a tough containment strategy.

Less than three weeks ago he offered a special Certificate of Deposit (CD) at a rate of 20.5 per cent, which was then upwards of three percentage points higher than any prevailing central bank instrument.

That short-term instrument matures today. But simultaneously, the central bank will hike the liquid assets ratio requirement on commercial banks to 25 per cent, from 23 per cent. Their cash reserve demand will move from nine to 11 per cent.

Massive hike

But that was not all. On Monday, the BOJ announced another massive hike in rates. Returns on its 30-day CDs will move from 14.65 per cent to 17 per cent, up 2.35 percentage points but a real hike of 16 per cent. On a 90-day instrument, the increase is from 15.05 per cent to 20 per cent. This 4.95 percentage point increase translates to a whopping 32.89 per cent jump over the previous rate.

The central bank's hike of the liquid assets ratio, in effect, limits the amount of money banks have to lend. And by offering higher rates, it makes it more attractive for people to invest in safe government 'paper' rather than risk their money in the real economy.

The upshot: commercial banks will demand higher rates from private sector borrowers who want to compete with the BOJ for credit. When it is expensive to borrow, firms, perforce, invest less, and there is less economic activity and fewer jobs.

Now, that latter point is one to which Pearnel Charles, the labour minister ought to pay attention. He has been attempting recently to mobilise firms not to lay-off workers in the current environment - an initiative being undermined by the current strategy.

Jamaica lacks the resources for the kind of stimulus packages being employed in the US and Europe to kick-start stuttering economies. But greater imagination can produce a more creative mix of monetary and fiscal policies to address our difficulties.

Clear, tough and decisive leadership that mobilises people would also help enormously.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.