Duncan warns against 'lofty and impractical' election promises

Fiscal Advisory Committee Chairman Keith Duncan has warned against "lofty and impractical" promises, including raising the income tax threshold or slowing debt repayment, as Jamaica heads toward a general election due by September.

"As election festivities reach fever pitch and the ‘silly season’ intensifies, both political parties should jettison the temptation to overpromise election goodies for which we do not have the capacity to deliver owing to current fiscal constraints," he argued in an opinion piece published in today's Sunday Gleaner.

Duncan added: "The parties should instead seek to outline to voters how we can build on the foundation of the hard-won macroeconomic stability to drive inclusive growth of the Jamaican economy."

The committee is a body of non-governmental representatives, including the private sector and academia. It was set up to provide views on the country's fiscal and economic outlook to the Government's Fiscal Commission, a guardian against unrealistic budgets.

Duncan's comments also come weeks before the tabling of the budget for the upcoming fiscal year, and as the government heads into negotiations with public sector unions for new wage agreements to replace ones that will end on March 31.

Duncan pointed to risks associated with increasing the income tax threshold and slowing debt repayments to redirect funds to other areas of expenditure.

He noted that last year's increase in the personal income tax threshold to $1.7 million came at a fiscal cost of $8.95 billion and raising the threshold to $2 million would cost an additional $13.4 billion, while an increase to $3 million would demand another $38 billion.

"Based on fiscal forecasts, there is very little to no room for increasing this threshold unless this expenditure is accompanied by additional tax revenue, whether in the form of newly introduced taxes or increases in the existing rates of taxation," said Duncan, who heads the JMMB Group, a financial services company.

Duncan also warned against any suggestion of slowing debt repayment, a move he argued could weaken Jamaica’s credibility among international investors and credit rating agencies.

He said: "Ratings agencies and domestic and international investors will be watching us keenly to ensure we maintain our fiscal responsibility, otherwise we could pay the price for reduced confidence and creditworthiness, as well as higher interest costs that will negatively impact Jamaicans in all spheres of life."

Another risk that Duncan pointed to is linked to the significant increase in public sector wages in recent years, largely due to the overhaul of the public sector compensation system.

From the 2021/22 fiscal year to the projected 2024/25 period, government spending on wages and salaries has nearly doubled, rising from $222 billion to $424 billion. As a share of GDP, public sector wages have jumped from 9.58 percent to 13.15 percent.

While acknowledging that the increases were "well overdue and well deserved," Duncan stressed that continued unchecked growth in this area could crowd out spending on critical sectors such as education, healthcare, and infrastructure.

He suggested the reintroduction of a fiscal target for wages relative to GDP or indexing wage growth to inflation as potential solutions to prevent runaway salary costs.

Duncan argued that unions, workers and the government "need to be aware of the extremely limited fiscal space" as they embark on a new round of wage talks. "Stakeholders should be guided by the available fiscal space and the many competing demands to ensure that they arrive at an informed and responsible position that will safeguard our fiscal sustainability and macroeconomic stability."

"The GoJ (Government of Jamaica) and the public sector must look to increase the productivity of the public sector and to introduce the promised performance management system which would complement this productivity drive in the public sector.

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