EDITORIAL - Laying the crisis bare
The fantasists who persist with the argument for so-called counter-cyclical stimulus spending by the Government and continue to whine about Peter Phillips' austerity Budget should analyse the report of the International Monetary Fund's (IMF) latest review of the economy.
It turns out that as bad as we knew things to be, they are, in fact, worse than we thought them to be. And they could deteriorate even further.
For instance, in so far as our Government has reported, Jamaica has a debt of approximately J$1.7 trillion, or around 130 per cent of gross domestic product (GDP), or the value of all goods and services produced in the country for a year. That ratio is not good, but many take solace in the fact that it was not as bad as Greece's, which is past the 150 per cent mark, even if worse than the other European PIIGS (Portugal, Italy, Ireland, Greece, Spain) whose fiscal crises threaten the survival of their common currency, the euro.
What the IMF and our Government have now confirmed - and what this newspaper has been suggesting for a long time - is that the national debt is about 140 per cent of GDP when the hidden bits are extricated from their crevices. These include hitherto-unreported off-balance sheet obligations, as well as payment arrears to domestic suppliers, and outstanding tax reimbursements to firms, pension schemes and individuals.
IMF ISSUES WARNING
The Fund has warned that should we continue on the same trajectory, we might, over the medium term, eke out growth of about one per cent a year. But with a worsening fiscal deficit, the debt will shoot past 150 per cent of the GDP mark.
Moreover, should the situation be left unattended, spooked lenders are likely to demanded higher interest rates from Jamaica, investor confidence will slump, people will flee the Jamaican dollar and the foreign reserves, and the drain on the foreign reserves would accelerate.
It need not come to this.
Indeed, Finance Minister Phillips' Budget has contained public spending and raised taxes in a bid to double the primary surplus this fiscal year to more than six per cent. That is important if Jamaica is to start to pay down its debt so as to provide, in the future, room for productive investment.
This is not a one-off effort; nor, as is already clear, one without without pain. It must include an overhaul of the tax system to allow the Treasury to collect more, more efficiently, under arrangements that are fair and predictable, and not on the whim of a minister or bureaucrat. The public sector has to reorganise for efficiency and to be less of a drag on the public purse, and government employees will have to be made to contribute more to their pensions.
But sustaining such a programme demands political will and the ability to hold a frank conversation with the people about the reality of our circumstances. That capacity resides in this administration, and particularly, in the charismatic prime minister, Mrs Portia Simpson Miller, who possesses high levels of emotional intelligence. She also has the advantage of a big win in last December's general election. It is, in part, to these that it refers when the IMF said there is currently in Jamaica a "favourable political environment" to do the hard stuff.
But that will require Prime Minister Simpson Miller to seriously utilise a bit of her political capital.
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