By Wilberne Persaud, Financial Gleaner Columnist
International Monetary Fund mission chief for Jamaica, Jan Kees Martijn's statement having concluded discussions with responsible officials including the minister of finance, Bank of Jamaica governor, financial secretary, other senior government officials, private sector and civil society representatives, expressed hopefully reassuring notes.
The mission's positive expectation persists although economic activity for FY 2012-13 declined and unemployment increased.They base their optimism on Government's ongoing implementation of the four-year economic programme which "aims to improve Jamaica's fiscal and debt position and competitiveness, and create the conditions for sustained economic growth."
The mission's statement further boosts its positive opinion on what they call strong implementation with structural reforms progressing.
Their interim check-up confirms that "all quantitative performance targets and indicative targets for end-June were met, including the floor on social spending. For FY 2013-14, a budget that targets a central government primary surplus of 7.5 per cent of GDP has been adopted and is now being implemented. The Government continues to implement its decision to strictly limit the granting of discretionary waivers. Several legislative amendments have been adopted to bolster tax administration, and the resources of the large taxpayers' office have been increased. All other structural benchmarks to date have also been met in a timely manner. A conceptual framework for a fiscal rule that will help lock in the gains from fiscal consolidation over the longer term is expected to be ready by the end of this month."
A critical aspect of the IMF's attitude to fiscal prudence for Jamaica relies on perception of the role of discretionary waivers and concomitant broadening of the tax base.
In effect, arbitrary breaching of the normal tax code presents too much room for distortion, while a smaller-than-optimal tax base reduces both potential and actual revenues.
No discerning observer of fiscal performance should find just cause for disagreement with any of this. The one question that arises is simply: how soon shall these two policy objectives take effect? Will this actually happen by the end of September? And what precisely are the conditions for 'sustained economic growth' that successfully avoided us these past decades?
Further, the mission envisages two future positives: improvement in the business environment and pursuit of strategic investments.
The latter present clear avenues for debate, conjecture and conflict. Already, opposing views on proposed Chinese investment in the Portland Bight Protected Area port development project demonstrate this. What economists previously referred to around the 1992 Rio conference as 'environmental accounting' is now referred to as 'natural capital accounting' - never mind, the concept is essentially the same. But we have a poor scorecard on these issues - just think of tourism, coastal degradation and bauxite exploitation.
Should we sort out these issues, and indeed we must, another quandary exists.
What roles for Government versus private sector? Ten years after Independence, the 1972 slogan popularised by the winning PNP was 'Better must come'. The slogan's potency grew, mushrooming precisely because these three little words captured both mood and feelings generated by worsening conditions of the majority population in face of apparent prosperity generated from the relatively new and growing economic activities - tourism, enhanced bauxite exploitation and manufacturing.
A major part of the problem was that fundamental aspects of profit generation through tax-incentive-led industrialisation failed to employ a growing labour force and solve the unemployment problem.
Today, labour force growth continues to outstrip employment opportunity. Reference to this obvious and, perhaps, unavoidable reality of current demographics leads us to wonder what both Government, in conjunction with the IMF, and our private sector consider to be the 'business environment' the mission statement expects to be improved.
Is it the legislative, administrative and institutional apparatus which private business must navigate to generate revenues and profits? Read here Customs, TRN, tax payments, company registration, etc.
What of physical aspects without which life presents unbearable hassles? What of safety and crime that now seems to present little distinction among urban, residential and rural areas? What of relevant education of the potential labour force?
How do workers get to their jobs? Where shall executives live? How do we solve the massive problem of rush hour being every waking hour in all urban centres? And to what does the IMF mission refer when it speaks of 'enhanced efforts to move recipients from welfare to work'?
These are all deeply relevant questions, answers to which we need. If policy responses already exist, we need to be made aware of them.
When the mission indicates that provided "performance remains strong, board consideration of the first review of Jamaica's IMF-supported programme under the EFF could take place late September", they place confidence in numbers that do, indeed, unavoidably capture all these 'finicky variables' our questions isolate.
But do they emphasize them in discourse with Government? Have we made it a priority to fix these problems and, more important, engage the people in efforts at solution?
So the IMF likely will grant approval and "SDR 19.97 million (about US$30 million) would be made available to Jamaica".
This is merely a tentative second step! There's still a long way to go.
Wilberne Persaud, an economist, currently works on impacts of technology change on business and society, including capital solutions for innovative Caribbean SMEs. Email: email@example.com.