EPOC lauds debt reduction
Economic Programme Oversight Committee chairman Keith Duncan lauded the rapid reduction in Jamaica's debt, but warned that high interest rates pose concerns.
“We are the Usain Bolt of debt reduction. We will become a model to the world,” Duncan said at his media briefing on Friday.
Duncan’s reference to Bolt, the retired sprinter, reflects the reduction in debt since the initial rise during the pandemic and its estimated 27 per cent fall up to March 2023.
He also lauded both political parties for stewarding the debt reduction since IMF arrangements since the 2009 financial crisis. Duncan wants the same dedication to reducing debt to shift towards mending social ills and criminality.
“I believe the environment is too toxic. And the same alignment for macro-fiscal, we need to have that for education, crime and violence, and community development. We need to mature as a country,” he said.
The onset of the pandemic resulted in an initial jump in the debt ratio 95 per cent in fiscal year ending March 2020 to 110 per cent in 2021, but is back down to 79.7 per cent in FY2023. It's expected to dip gradually to 59 per cent in FY2027.
“We have headwinds now including the high uncertainty in global markets, we still have the Russia-Ukraine situation which has geopolitical tensions which could escalate; also, in the US, some banking failures due to tight liquidity conditions. That is something that we must pay close attention to, and the Federal Reserve also,” said Duncan. “The risk to Jamaica is that further slowdown of growth from our major trading partners could impact our economy," he added.
Annual inflation continues to trend downwards, ending February at 7.8 per cent relative to 8.1 per cent in January 2023.
That said, inflation continues to erode the purchasing power of citizens. Duncan welcomed the pending increase in the minimum wage, which will rise to $13,000 per week in June.
For the review period April 2022 to January 2023, tax revenue of $583 billion was $4.4 billion ahead of budget and $115 billion above receipts collected for April 2021-January 2022.
“This positive performance relative to budget was mainly attributable to higher than programmed outturns from greater economic activity than budgeted,” said Duncan.
On Wednesday, the American central bank, the Federal Reserve, raised interest rates by a further 25 basis points. However, what was more significant was that the Fed signalled that they may be close to the top of their rate hiking cycle, the EPOC chairman said.
“This signal by the Fed is expected to figure into the BOJ’s analysis and monetary policy actions going forward,” added Duncan.
The BOJ Monetary Policy Committee is due to issue a new rate decision on March 29. Its past two decisions maintained the policy interest rate at 7.0 per cent, after more than a year of sustained hikes.