Peter Phillips conceded Thursday that the J$15.9-billion tax package he announced this week was contractionary, but still expects to squeeze growth out of the economy over the next three years in line with International Monetary Fund (IMF) targets.

"... We anticipate average growth in the period, next year and thereafter, somewhere between one and two per cent," Phillips told journalists during a briefing.

It was the first time the Jamaican finance minister was giving specific growth assumptions for the economic support agreement that the Simpson Miller administration is seeking to conclude with the Fund.

The tax package, most of whose measures begin at the start of the new fiscal year on April 1, was among a series of prior actions demanded from the Government ahead of concluding the agreement.

Some of the new taxes kick in on March 1.

Simultaneous with the announce-ment of the new taxes, Phillips launched an initiative to restructure more than J$860 billion on domestic debt, at lower rates and longer maturities, aimed at saving J$15 billion a year in interest payments over the next seven years.

So far, financial institutions have been reluctant to weigh in on what the debt restructuring will cost them.

Banking group, National Com-mercial Bank Jamaica, which is one of the largest holders of Government of Jamaica (GOJ) securities, said Thursday that it was still engaged in a review and could not comment.

The bank holds at least J$70 billion of GOJ securities, mostly in local currency.

Phillips is also attempting to finalise a wage freeze agreement with public-sector unions to reduce the Government's pay bill from 11 per cent of gross domestic product to nine per cent.

The overall aim of the austerity programme is to reduce Jamaica's debt, now at 140 per cent of GDP, to around 95 per cent of GDP by 2020.

Phillips that the tax package specifically, and the programme more broadly, was "inherently contractionary", but argued that that could not necessarily translate to negative growth in the economy.

Phillips is, in part, pinning his hope for expansion in GDP on a number of major projects now being flogged by the administration, including a US$600-million investment by China Harbour Engineering Company to complete and expand the north-south leg of Highway 2000.

He is also looking to French and Chinese options to expand and modernise Kingston's port as a project, in its early design, to transform Jamaica into a major logistical hub.

Investments incentives

Phillips also argued that the adjustment he is now pursuing "provides a great incentive" for investments by domestic entre-preneurs in areas such as agriculture and agro-processing to displace up to half of Jamaica's near US$1-billion food import bill.

But the finance minister acknowledged that the programme he has unveiled would be tough and painful, but said he had few options.

"It is the best solution that could be found in the circumstances," Phillips said. "It is a range of choices between difficult and more difficult, between bad and worse."

Jamaica, he said, was not in a position to finance counter-cyclical spending to stimulate the economy and its debt profile meant that it was not in a position to borrow to spend.

Said the finance minister: "I am as much a Keynesian as anybody else, and maybe more than most. But the fact of the matter is that to engage in that kind of expenditure you have to have somebody willing to lend you."

business@gleanerjm.com