Fiscal Commissioner Courtney Williams in presenting the Independent Fiscal Commission’s (IFC) assessment of the country’s fiscal policy has passed it as “credible”.

In sharing details of the first Economic and Fiscal Assessment Report from the Independent Fiscal Commission, Williams pointed out that the report was first published and tabled in Parliament, and that aspects of the report have been divulged through media reports.

“I must reiterate that the main and most important points made by the report are that: based on macroeconomic and fiscal projections, which are reasonable and achievable, the current budget is credible; and that Jamaica’s fiscal policy and position is sustainable,” he stated.

The chairman of the IFC added that part of the duty of the commission is to address public concern for the credibility of the budget and if the overall fiscal position and policy are sustainable. On this note, Williams highlighted that while the country has become accustomed to macroeconomic stability, having a “credible” national budget was not always guaranteed.

“That is why Jamaica is now engaged in a comprehensive process of economic reform and related institutional strengthening. The IFC is simply the latest component of this process,” he added.

Pointing to fiscal corrections needed in the economic reform process, Williams said that such corrective measures have resulted in the Government reducing its borrowings and ceasing from overcrowding the financial market with financial instruments, thus preventing the private sector from playing its role in growing the economy. With more room for the private sector to access finance and grow, there have been increases in production job creation, exports, and an improved current account balance.

“This improved production means more tax revenue for government and a healthier foreign exchange (FX) market with more inflows,” the IFC chairman continued.

Additionally, with more FX inflow, he said, the central bank has found it easier to “proactively practice modern monetary policy”, leading to several monetary policy reforms such as improved FX management, record low interest rates and entrenched low inflation through inflation targeting. These also came with the independence of the central bank.

“None of these things could happen without improved fiscal discipline and fiscal consolidation, and cannot continue if we were ever to drop the fiscal ball. To ensure that we never again stray away from a prudent fiscal path, therefore, Jamaica enacted fiscal rules, and we now have an Independent Fiscal Commission …to provide independent technical analysis,” Williams highlighted.

Red flags

Notwithstanding the progress made, the fiscal commissioner pointed out some matters for improvement. He called on the Government to present a “comprehensive fiscal profile for the specified public bodies” – except the Bank of Jamaica and Jamaica Mortgage Bank – in the Consolidated Fund. Williams also urged the Government to table “revenue measures” at the same time with other budgetary documents, including the Estimates of Expenditure and Payments.

Touching on public sector employment, the IFC chairman called for “establishing clear negotiation cycles” ahead of the budget, plus reintroducing the fiscal rule for wages and salaries as a percentage of gross domestic product (GDP).

The fiscal rule established that wages and salaries should not surpass 9 per cent of GDP; however, they were suspended during the COVID-19 pandemic. Williams also urged the Government to speed up the Public Sector Reform Programme and extend the deadline for the filing of income tax within the first quarter of the fiscal year.

Private sector contribution

While noting that the Government must lay the foundation for economic growth, the IFC chairman called on the private sector to turn on the “big engine” to drive economic growth.

“The foundation has been laid, and that has been the case now for several years, and so now we must also focus on the private sector…We are grateful that we have seen a lot of impressive individual private sector initiatives and expansions in recent years, but in a collective sense, we need to see that trend continue and accelerate for the entire sector,” Williams said.

He added that if there are “bottlenecks” slowing the pace of growth, the IFC will need to examine them and work with the private sector to clear them up.

Still, he maintained that given the economic stability that Jamaica enjoys, there is a “great opportunity for private-sector-led growth”.

 “It is greater private sector earnings that must generate the tax revenue to fund continued improvements in fiscal policy and increased public spending in areas such as public safety, infrastructure and human capital development,” Williams stated.

“…It is private sector export earnings that must provide the funds in the foreign exchange market to people can have ready access to hard currency, and the central bank can maintain reserves and maintain order in the market,” he added.