Editorial | IFC off to good start

The Independent Fiscal Commission (IFC) has made a promising start.

Its assessment of the Government’s debt and macroeconomic projections, which is outlined in its Fiscal Policy Paper for the 2025-26 financial year, concludes that the administration’s forecasts are, on their face, sound. Reaching the 60 per cent debt-to-GDP ratio by the 2027-28 financial year is achievable; the economy is likely to return to growth this fiscal year; and the inflation projection (5.6 per cent) and deficit targets (primary at 5.1 per cent of GDP) are credible.

However, the IFC has raised important questions about the Government’s reporting of some of its fiscal parameters and arrived at different determinations about short-term outlooks. For instance, at 0.9 per cent, it expects the economy’s decline for 2024-25 will actually be deeper than the administration’s projection.

Hopefully, its analyses will contribute to a better informed, more thoughtful, and less hubristic debate of Jamaica’s economic policy.

In that respect, the commission, led by former finance ministry and International Monetary Fund (IMF) official Courtney Williams, has already outstripped the Office of the Auditor General, which, as this newspaper previously observed, was given a job that it was not designed or equipped to perform.

Further, if Commissioner Williams and his team continue on the track they have staked out, stakeholders will receive substantially more robust analysis of the macroeconomic environment than was managed by the Economic Programme Oversight Committee (EPOC), the groundbreaking body that policed Jamaica’s economic reform agreements with the IMF, as well as its post-IMF fiscal programmes.

The law establishing the IFC, an independent agency that is accountable to Parliament, was passed two years ago, but the body was only promulgated in January. This, therefore, is its first formal review of a Fiscal Policy Paper, the one for the fiscal year that begins on April 1.

INDEPENDENT PERSPECTIVE

Essentially, Mr Williams’ job is to provide the public with an independent perspective of the Government’s fiscal programmes, the fundamental aim of which is to bring the national debt to, and maintain it at, no more than 60 per cent of GDP.

If the Government believes that it has reasons to deviate from that ratio, it is Mr Williams who is to determine if the shocks, on whose effects the administration relies as justification for the deviation, meet the threshold for the proposed adjustment.

And at least twice a year, it must report its review of fiscal policy to Parliament and publish its analyses on its website.

The Gleaner expects that Mr Williams’ first report will be subject to much scrutiny – as it ought to be. But it is understandable that while the agency builds out its staff, Mr Williams implicitly appealed for forbearance that “this first report will neither incorporate an assessment of medium-term and long-term debt sustainability that goes beyond compliance with the fiscal rule nor include an assessment of debt sustainability based on stress-testing interest and exchange-rate assumptions, debt composition, as well as economic and fiscal risks, similar to the IMF’s debt-sustainability analysis (DSA)”.

Mr Williams, however, must give specific timelines as to when the public should look forward to such reviews, taking into account the IFC’s obligation to produce a mid-year report. A review of these matters – or at least some of them – does not have to await the Fiscal Policy Paper for 2026-27.

DISJOINTED APPROACH

These issues apart, the commission also complains of the “somewhat disjointed rather than … consolidated approach” in which the Government presents its Budget, saying that in some instances, it hampers robust analyses, which caused the commission to treat some of its conclusions as preliminary and “subject to revisions as fiscal developments arise”.

The reporting of the so-called Specified Public Sector (public bodies apart from the Bank of Jamaica and the Jamaica Mortgage Bank) is one of the areas with which the IFC has concerns.

It said: “While the Government tables consolidated expenditure estimates for the public sector and provides information and analysis of the debt for the Specified Public Sector, there is no presentation of the fiscal balance for the Specified Public Sector, for example. Jamaica’s fiscal rules directly link the fiscal balance of the Specified Public Sector to the public debt.

“An absence of such important information restricts a more rigorous analysis of Jamaica’s consolidated fiscal position.”

The fact that the Government usually tables its revenue measures (when new ones are introduced and old ones adjusted) after the passage of the expenditure was also worrisome for Mr Williams.

“This approach,” he said, “only allows for a partial assessment of Jamaica’s fiscal position by the Parliament and the IFC prior to the minister’s opening of the Budget Debate and does not comply with the Third Schedule of the FAA (Financial Administration and Accountability) Act, which requires the FPP (Fiscal Policy Paper) to outline details as to revenue policy and administration, including planned changes to taxation and other revenues.”

There are many other important issues raised by the IFC, but these alone should bring substantial change, and value, to the Budget process and help to enrich the debate thereof.