David Cameron's message to Portia
Delano Seiveright , GUEST COLUMNIST
It may have been a bout of desperation and wishful thinking, but the thousands of Jamaicans who tuned in two Sundays ago expected the prime minister to bring clarity to affairs concerning our economic crisis. There was hope for direction regarding the inking of a deal with the International Monetary Fund (IMF) and a credible plan of action guiding the country's urgent need for foreign exchange-earning development and job creation.
Alas, the prime minister fell so so short of the mark that concerned observers made the unprecedented call for her to address the nation a second time - which she had to do in last Monday's press briefing. What an embarrassment!
While Jamaica grapples with a crisis of leadership, the negative headlines are mounting. The recent editorial in one of America's leading newspapers, The Chicago Tribune, titled 'Jamaica's debt hurricane: The Greece of the Western Hemisphere', will undoubtedly further diminish Jamaica's image in the minds of investors, even though some of the points made are debatable. Likewise, the recent editorial in The Gleaner titled 'Jamaica's fiscal cliff' only reaffirms the sordid state of affairs.
It is unfortunate that with a strong mandate given to central and local government, the Government continues to drag its feet on taking the bold actions required to reset the Jamaican economy. Continuing to 'buckshuffle' propels us towards disaster.
The crisis we face and key actions required to address it are worth repeating. Our unsustainable debt is at around 140 per cent of GDP and servicing that debt takes up in the region of 60 per cent of the Jamaica's annual Budget. With tax revenues exhausted year upon year, we borrowed - and burrowed - our way into an economic mess.
With the doors of lenders either closed or barely open at high interest rates, we are up the creek. An IMF agreement would at least reopen the doors of the multilaterals, including the World Bank, the Inter-American Development Bank, and the European Union, while raising business confidence and possibly reopening access to the capital markets.
In any event, we have to cut the cost of Government, raise revenue intake, and borrow less. The only significant ways to do this is to cut our public-sector wage bill, reform our Government's pension arrangements, and apply comprehensive tax reform.
Government inertia thus far has resulted in the net international reserves being cut nearly in half, dropping from US$2 billion to just over US$1 billion; the exchange rate falling to J$93 to US$1; cost of living increasing with food prices skyrocketing; and interest rates are trending up with no growth in the economy for all of last year.
BRITAIN'S BOLD MOVES
In 2010, the Cameron administration explained to the people of Great Britain specifics of the whopping £83 billion (US$130 billion) in public-spending cuts through to 2015, in addition to a series of tax increases. The aim then of this five-year austerity plan - Britain's biggest cuts of public spending since World War II - is to eliminate a spending deficit that in 2009 reached a high of £156 billion (US$244 billion). Late last year, the administration extended the government's cost-cutting programme to 2018.
The British economy has, for years, been saddled with very high levels of public debt (by 2010 averaging £43 billion - US$67 billion - a year in debt interest) and a budget deficit then of 11.1 per cent of gross domestic product, the highest in the G7. The global economic meltdown worsened the crisis. Chancellor of the Exchequer George Osborne pointed out that action was necessary to avoid a Greek-style fiscal meltdown.
The new government, faced with severe economic problems, didn't hesitate in giving the bitter pill required to staunch the bleeding economy and, over time, heal the wound. Unfortunately, as many as half a million public-sector jobs will be cut, in addition to reduced welfare payments and the ending of scheduled government programmes. The moves have been challenging to Britons, and the cost-cutting programme has been problematic. Yet any attempt to delay the inevitable would very likely spell disaster.
What is particularly impressive about the bold actions of the Cameron administration is that it moved decisively just a few months after victory at the polls and in the context of an uncomfortable coalition government.
The Simpson Miller administration, because of high levels of inaction, flagrant spending, and failure to carry through on campaign promises, is fast losing credibility. The minister of finance, Dr Peter Phillips, has run out of excuses. He has now admitted, after many unkept deadlines, that there are prior-action requirements that must be performed before he can get a deal with the IMF.
His Opposition counterpart and former Minister of Finance Audley Shaw had asked Dr Phillips to be transparent and state publicly what these requirements are, and how long they will take to be accomplished.
While Mr Shaw, under the then Jamaica Labour Party administration, had problems with the IMF, he implemented a successful debt exchange and carried through major game-changing initiatives such as the introduction of a fiscal responsibility framework; the Junior Stock Exchange, which encouraged business expansion; sharply lowered interest rates; and convinced the Chinese government to invest big in Jamaica. This is evidenced in follow-up projects like the north-south highway, as well as the expansion of the port at Fort Augusta and the Caymanas Economic Zone - more than US$2 billion in Chinese investments.
It is more than apparent that Minister Phillips has struggled to gain the support of the prime minister, who was forced to arrive at a consensus after a second Cabinet retreat and in response to sustained pressure from civil society and the Opposition.
The prime minister's hands-off approach has left the ship of state of Jamaica drifting like a helmless and rudderless vessel. Where is the leadership?