Leon urges focus on job creation, growth
As the Jamaican Government tries to steer the country on a path to economic growth, Internatonal Monetary Fund (IMF) resident representative Dr Gene Leon warns that there are no dry runs, and that it is incumbent on the administration to get its policy prescriptions right.
But he also acknowledged, while addressing a Jamaica Institution of Engineers luncheon meeting in Kingston, that it is not always easy to make the right call.
"If the Government wanted to use tax policy to influence the behaviour of other sectors, it would not know in advance the precise magnitude and/or timing of the reaction to the policy and what implication it would have on decision making within these sectors," said Leon.
"Even if the exact response paths were known, shocks can derail the best laid plans."
Consequently, as he likened the economy to the steering of a ship, Leon said care must be taken in steering a sustained path, while navigating around challenges and taking corrective actions for unforeseen events.
"It must also be recognised that there are no dry runs in economics. Any policy implemented will bring us to a new starting point," he said.
Over the years, the country has been saddled with high debt, low or no growth, an inefficient business environment, and declining output.
The situation worsened with the recession, forcing Jamaica to turn to the IMF for a US$1.27 billion bail out.
Having stabilised under the programme, the Golding admini-stration is now crafting policies designed to lift the economy.
Leon said policymakers should be focussed on sustained growth levels, increased employment, a sound financial sector, lower debt and fiscal sustainability as well as social stability.
But to achieve these goals, he argued, requires a shared vision and possible need for trade-offs.
"Because of the continuous and not fully known reaction to policies implemented, as well as unpre-dictable shocks, we need to recalibrate often to maintain direction towards the goals," said Leon.
"In the financial sector, for example, capital requirements have been increased under Basel II to require institutions to keep buffers to better handle times of financial stress."
Using an engineering illustration, he said, "a close parallel is engineering a tower to withstand tremors or wind gusts that historically have been predicted to occur with very low probability".