Editorial | Clearing paths to growth

Jamaica’s past decade of often painful but disciplined fiscal reform is proving its worth.

Although badly stressed by the COVID-19 pandemic (it declined 11 per cent in the 2020-2021 fiscal year) the economy, cushioned by lower debt ratios and relatively healthy reserves, did not break. But more importantly, as the International Monetary Fund (IMF) pointed out in its recent annual Article 4 consultation of Jamaica, the economy, buoyed by near pre-pandemic activity in tourism, is in recovery mode.

Growth for the fiscal year ending March 31, the IMF projected, will be around 3.5 per cent. The value of annual output, in real terms, will be back at, or close to, the pre-pandemic level. The country’s debt, which had crept to near 110 per cent of gross domestic product (GDP) at the advent of the pandemic, is now hovering at around 84 per cent of GDP and is on track to declining to the legislated level of 60 per cent by 2027-28, only two years later than the original timetable.

In the face of this performance, the IMF’s executive directors “commended … (Jamaica’s) the authorities’ strong track record of building institutions and prioritising macroeconomic stability, which, together with a nimble and prudent policy response, helped Jamaica successfully navigate the pandemic and other recent global shocks”.

NOT OUT OF THE WOODS

They, however, warned that Jamaica is not fully out of the woods. For instance, the continuing war between Russia and Ukraine, or some other unknown shock, could further spike commodity prices or induce uncertainties in markets to have a negative impact on Jamaica. Or it could be a new variant of the coronavirus that spooks potential tourists, who account for a big chunk of Jamaica’s earnings. Or it could be a natural disaster such as a hurricane.

Faced with those uncertainties, the IMF executive directors suggested that Jamaica maintain its “planned path of primary balances (5.8 per cent of the GDP for the fiscal year now ending and 5.4 per cent for the next - coupled with continued data-dependent monetary policy tightening”. That policy approach, they said, “should further enhance debt sustainability, curb inflation, and create fiscal space to respond to future shocks”.

Indeed, this newspaper, as a supporter of Jamaica’s commitment to fiscal discipline since the new path was embarked on in 2012, broadly supports the IMF’s entreaties. It would be a travesty if gains, achieved across political administrations, were frittered away.

This, however, does not mean that there is not room for creative policy thinking to enhance growth and expand the Government’s ability to spend without sacrificing the fiscal rectitude of the last decade.

Put another way, even if the growth outturn is higher than the IMF’s two per cent estimate of 3.5 for 2022-23 and the two per cent projected for the coming fiscal year, economic activity won’t be sufficiently robust to significantly change the lives of a large portion of the population. Our concern is that notwithstanding the efforts to cushion the effects of the fiscal adjustment, many could lose faith in the reform project.

That is why when the finance minister, Nigel Clarke, unveils the Government’s Budget this week, for the coming fiscal year, we expect an approach that balances fiscal prudence and policies that propel the economy beyond the anaemia with which it has struggled for too long.

We, of course, appreciate the constraints faced by Dr Clarke and understand that the job of driving growth is not only his alone. Neither is it only about throwing new money at old problems. It also involves using available resources more efficiently, which sometimes requires acting with greater urgency in advancing policies and programmes and ensuring that money is spent for what it is allocated.

PERENNIAL PROBLEM

Jamaica’s perennial problem of low growth is partly the result of its long-standing crisis in education and training. More than six of 10 workers have no training for the jobs they do. Poor educational outcomes leave the island with a workforce that cannot compete globally. The Government established a commission, chaired by Professor Orlando Patterson, on how to reform the education sector. It has been more than a year since the Patterson Report has been in. However, the Government is yet to engage in a meaningful public discussion on its findings and recommendations.

Further, crime and corruption are estimated, respectively, to cost the Jamaican economy five per cent of GDP annually. Even assuming overlaps between the two, that translates to between J$100 billion and J$200 billion a year.

Fixing crime is a more complex, long-term endeavour. The economic and social price Jamaicans pay for it, however, makes it an issue for which a relentless drive for consensus on its solution is critical. We do not perceive from the authorities the effort required to achieve this.

Neither are policymakers and political leaders sufficiently intolerant of public corruption. Nor are they aggressive enough in closing loopholes – like removing the gag clause from the law that prevents the Integrity Commission from speaking about its investigations – in the law aimed at deterring corruption.

Commitment to civic values, including general good behaviour, decency, and order, helps to create an environment in which economic growth thrives. But campaigns promoting values are likely to be politically ridiculed.

Perhaps Minister Clarke should infuse his fiscal and economic arguments with these ideas when he speaks about his Budget.