EDITORIAL - Difficult task ahead for Government
Fearmongers will holler from the mountaintops that austerity measures such as those announced by the Government earlier this week will create even more violence in a society that has become saturated with grief because of the weight of crime.
But this newspaper, which has repeatedly warned of the dosage of bitter medicine that must be ingested to fix the economy, is hopeful that Jamaicans will show maturity in line with more than 50 years of sovereignty. And we urge alarmists to tone down the rhetoric in favour of clear-headed, rational thinking.
The drawn-out negotiations with the International Monetary Fund (IMF) were predicted to result in pain for the embarrassingly indebted Jamaican Government and its people. Now that the IMF-approved measures have been announced, many are wondering whether any benefits will ever accrue to the Jamaican economy and, above all, who will hurt most.
It is important that the Government preserve the social safety net for the poor and other vulnerable groups so that they are not swept away by the tide of painful, but necessary austerity to wean Jamaica off its self-destructive addiction to debt.
Ironically, the IMF has itself warned of the dangers of cutting government spending too rapidly. In a paper published a few years back in the IMF's quarterly magazine 'Finance and Development', the organisation had this to say: moving too rapidly to enact austerity measures - in other words, taking steps to shore up national finances and bring down debt by cutting spending and raising taxes - will hurt income in the short term and worsen unemployment in the long term.
Indeed, this is the assessment of many opposition voices who argue that these measures will hurt more than help.
And therein resides the worry for middle-class Jamaicans, including pensioners. There is a grave unemployment problem in Jamaica and it is moot whether the cocktail of a debt swap and higher taxes will damage the job landscape.
Pessimists argue that the National Debt Exchange and the $16-billion tax package will not encourage anyone to start up a new business and offer employment. They argue that the opposite is more likely true - that commerce may contract and joblessness increase.
The IMF is loaded with an array of wise economists who appear to understand the ill effects of austerity measures on populations. Its chief economist, Olivier Blanchard, has been giving sage advice to the British government. Only last month, he suggested that that government soften its austerity plans in order to help its struggling economy, which is predicted to experience anaemic growth of one per cent this year.
So even though the IMF is disapproving of extreme austerity that poses existential threats to economies, Jamaica is in the process of rigid belt-tightening that, understandably, might staunch some oxygen to some sectors.
The Government has a difficult task ahead: to slash spending to reduce its deficit and raise taxes at the same time. This may yield negligible growth but the sacrifices should go a far way to unload the crippling debt that prevents the Government from investing significantly in upgrading its infrastructure and shoring up its social responsibilities.
The economic fallout from the tough times has been felt for a number of years, resulting in the shuttering of dozens of small businesses islandwide. A casual view of once-thriving communities like Mountain Avenue, Slipe Pen Road and Red Hills Road will reveal that commerce is dwindling.
We urge the Government to balance carefully the fundamentals to ensure that the IMF-imposed conditionalities do not push Jamaica over the brink in the next few years.
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