Successful IMF test creates confidence - Byles
Published:Friday | March 28, 2014 | 12:00 AM
With Jamaica's primary balance falling by three per cent short of the Government's Budget for the end of January, it means that that fiscal indicator is under pressure, said Richard Byles, co-chairman of the Economic Programme Oversight Committee (EPOC).
However, he said there was a positive aspect in that "because we are importing less, the current account looks a little better".
The Government's response has been to restrain the spending side by cutting $2 billion from the current budget, and underspending the capital budget by $7.6 billion, Byles told a media briefing in New Kingston earlier this week.
That is not something that the EPOC would like to see as "Jamaica needs infrastructure renewal so badly," he said.
But the EPOC is not overly concerned about the shortfall in the primary balance as "its only $2.1 billion, if I can put it that way" which is quite low "in the scheme of government finances," he added.
"We can only hope for better in the future," he said.
NIR a different situation
The situation regarding the Net International Reserves (NIR) was quite different, as Jamaica surpassed its March target in February, with a total of US$1.07 billion, Byles said.
"So as long as the BOJ (Bank of Jamaica) doesn't sell off all that foreign currency, it seems we will pass the NIR test for March," he said.
Byles said legislation on the upcoming fiscal rule should be a "great comfort to investors and Jamaicans who are concerned about fiscal responsibility," requiring the Government to work towards improving the debt-to-gross domestic product ratio.
"The only thing that can deter Jamaica from that is natural disasters such as hurricanes," he said.
The rule should prevent governments from overspending to win elections and prevent finance ministers from cowboy-like behaviour, he said.
"I am very consoled by this piece of legislation, which will guide us going forward," Byles said.
He said that overall, during the first year of the IMF agreement, "Jamaica has done a lot to improve its fiscal situation."
The primary balance is 41 per cent better than last year, while the fiscal balance is 47 per cent better, he said.
"The whole tax structure has been revamped," said the EPOC co-chairman, adding that "that is a fundamental development for the country."
Passing the last three IMF tests has created confidence, and if Jamaica can pass the fourth test it will bolster confidence even more. But that confidence "needs to be translated into more investments, employment and growth," he said.
"And that is the main challenge for 2014."