EDITORIAL - PM has to spend political capital

We have previously observed in these columns that any success by Jamaica in pulling itself out of economic crisis will demand tough, and mostly politically unpopular, actions.

The new Portia Simpson Miller administration, it seems, understands this. Last week, the finance minister, Dr Peter Phillips, explicitly declared this to journalists.

Not only were the fiscal accounts in poor state, he said, but what the new Government discovered when it took office last month was substantially worse than it expected. Not only was revenue behind projections, but even after cuts in expenditure, the gap in the Budget for this fiscal year would be much wider than expected.

In the face of these difficulties, Dr Phillips said, the Government's capacity to spend in the coming fiscal year will be "significantly reduced", even as it implements other measures to solve the problems. Our concern is that Jamaica may be battling on its own.

We are reminded of Dr Phillips' declarations in the context of his current trip to Washington, with other technocrats, to seriously begin negotiations with the International Monetary Fund (IMF) for an agreement to replace the previous administration's standby credit facility that effectively crashed a year ago.

Similarities with greece

All this is illuminated by developments in Greece, whose Parliament has just agreed to a new round of austerity in exchange for the European Union's (EU) release of another bailout package to allow Athens to stave off default on its debt.

The Greece situation is, indeed, relevant to Jamaica. The underlying problem of both economies is that they carry unsustainable national debts. In Greece's case, it is around 150 per cent of gross domestic product (GDP); Jamaica's, officially, is 131 per cent of GDP, but moves closer to 140 per cent if commercial payment arrears and other unstated liabilities are taken into account. The cost of debt servicing stifles the ability of their governments to invest in social and other infrastructure that is necessary to drive economic growth and development.

But as the analysts often explain, given that Jamaica's problem is not primarily balance of payments driven, it is not the finances that will be unlocked from the IMF that makes Dr Phillips' negotiation with the Fund critical. Rather, it is resources the IMF's imprimatur will free from other agencies - as was pointedly highlighted by the EU's new representative in Jamaica, Paola Amadei.

"... We cannot ask our citizens to be frugal and accept sacrifices (think Greece, Italy, Spain, Portugal, Ireland) and then be profligate outside Europe," she told this newspaper.

Tough decisions

Her point is that the EU will not resume financial support to Jamaica if it is not convinced that the Government is prepared to do the difficult things. For the current fiscal year, the EU promised €39.1 million to Jamaica and had disbursed only €6.9 million when the flows were shut off, contributing to the J$25.1-billion shortfall in revenue reported by Dr Phillips last week.

Taking hard decisions is not easy - and can't be only Dr Phillips' to make. Indeed, Prime Minister Portia Simpson Miller is known for her emotional intelligence and is endowed with much political capital, some of which she will have to spend to shore up Dr Phillips in executing his fiscal programme. Failing to do this may spare Mrs Simpson Miller any mess personally, but leave Jamaica dirty.

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