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Fiscal praise for Jamaica - CDB official says nation sets example with economic policies

Published:Monday | June 9, 2014 | 12:00 AM

Jermaine Francis, Staff Reporter

Jamaica is being touted as an example that other Caribbean countries can look to for how to better manage their finances.

Carl Howell, chief economist at the Caribbean Development Bank (CDB), says he believes the fiscal rules that Jamaica has adopted will go a far way in turning the country's economic fortunes around.

Howell was speaking with journalists at the recently concluded CIBC FirstCaribbean Infrastructure Conference in Port-of-Spain, Trinidad.

"We are heartened by the very aggressive steps that Jamaica has taken. It seems that the country is on point to meet its targets in relation to its programme, which is good," Howell said in response to queries from The Gleaner.

He said if the rules were followed, Jamaica could become a beacon for other regional states which are struggling to balance their fiscal programmes.

"Jamaica, we hope, could be a success story that we could say to the region 'look', in particular Barbados, 'If you are willing to take difficult decisions, there are some benefits at the end for you. If you delay taking very strong corrective policy actions, the economy will continue to languish'," Howell stated.

In February, Howell had warned that if Barbados was to experience any sort of marginal fiscal growth "urgent attention at fixing the fiscal dynamics in the country" were needed.

At the end of March, the fiscal rules legislation, which is geared at putting a cap on government spending, was passed in both Houses of the Jamaican Parliament.

It is expected that the rules will enable the country to substantially reduce the debt-to-gross domestic product (GDP) ratio over the next 10 to 12 years.

GDP is defined as the total value of goods produced and services provided in a country during one year.

Howell said this was a positive move for Jamaica, as countries that follow strict fiscal rules tend to have relatively well-managed debt levels.

"This is where Jamaica is going and this is the advice we would have for most of our member countries as well. They are unpopular, because what fiscal rules will do is tie the hands of our political masters, but it is necessary," he said.

He added that though these rules may come off as harsh, they would eventually ensure that greater accountability and better management of resources prevail.

In 2013, the Jamaican Government submitted the framework for the legally binding fiscal rules to the International Monetary Fund.

The economic policies, which have received full support from the Opposition, seek to limit the public sector's annual deficit in a bid to reduce the public debt to no more than 60 per cent of GDP by 2016.