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Shaw up to bat - Next finance minister must hit ground running, say economists

Published:Tuesday | March 1, 2016 | 12:00 AMEdmond Campbell
Haughton: The onus is, therefore, on the nation to have a smooth transition from one administration to the next.
Audley Shaw
Williams ... Expected to be part of the team at the finance ministry.

Audley Shaw, the man anointed by Prime Minister-designate Andrew Holness to take charge of the Ministry of Finance, will have to bat boldly on a sticky wicket after receiving his instrument of office, according to economist Errol Gregory.

At the same time, economist Dr AndrÈ Haughton says forces in the global economy are counting on Jamaica to do well this year.

"Global investors want us to improve on what we have done so far, over the last couple of years. As long as there is a smooth transition (in government), we should be on the front foot."

In the run-up to the February 25 general election, Holness had given a vote of confidence to Shaw as the finance minister in an administration led by him.

But Shaw is not expected to be caught napping, opined Gregory, who suggested that Holness, after his inauguration Thursday, might also appoint financial analyst Fayval Williams to be part of the team at the finance ministry.

Gregory told The Gleaner that Jamaica has made a lot of sacrifices to bring its fiscal house in order.

However, he noted that while there have been successes in a number of key macroeconomic indicators, the country's economy was still in a "precarious position".

While Jamaica was on target to pass its 11th International Monetary Fund (IMF) test, Gregory cautioned that the primary balance surplus target, which is expected to climb from $60.7 billion to $120.7 billion over the January to March quarter, would present a challenge.

"We really are at a critical juncture now. You have to meet stricter primary surplus targets, and then there is the pension reform pending and also the public-sector reform issue," he said.

Signalling that the new administration would have to pursue measures to achieve meaningful economic growth, Gregory said one criticism he had of the previous People's National Party government was its "single-minded focus on passing the (IMF) test".

Said Gregory: "We have been compressing for some time, doing the kind of fiscal discipline that we ought to do, but, ultimately, Government can't just concentrate on any one economic target at the detriment of the others."

Continuing, Gregory reasoned that even though there has been improvement, in part, in the social sector, "there is no question that there has been a lot of poverty and suffering that can only be alleviated in a sustained way if we can get some growth in the economy".

Commenting on the state of Jamaica's economy, Haughton said the overall economic outlook for Jamaica this year is good. The onus is, therefore, on the nation, he added, to have a smooth transition from one administration to the next.

"The policies proposed to be implemented, if carefully calculated, then we should see the impact of them on the economy."

He said the country had done well so far in terms of the macroeconomics, but pointed out that one of the most important indicators - GDP growth - has been lacking.

Outgoing Finance and Planning Minister Dr Peter Phillips said it was critical that the country's debt trajectory continue downwards.

Phillips also emphasised the need for the country to continue improving its balance of payments and to sustain the low inflation rate.

"Our three to four years of economic reform programme - as supported and defined by the extended fund facility with the International Monetary Fund - we have met every one of the quarterly reviews. Our debt is down, we have run effectively balanced budgets over the period three years running. We are in the process of expanding our capital budget by virtue of the lowered primary surplus targets," he said.

Phillips noted that the outgoing administration had maintained and exceeded the social safety net expenditure and sustained major expenditure, particularly in education and to expand opportunities for students at tertiary institutions through the Students' Loan Bureau.