EDITORIAL - Optimistic about the future

Counter to popular sentiment, perhaps, this newspaper remains, even though guardedly so, optimistic about the new year and Jamaica's longer-term economic future.

Whether our confidence proves well placed, or not, depends significantly on if Government holds its nerve and musters the will to push through the economic reforms it, nudged by the International Monetary Fund (IMF), started to implement 15 months ago. The administration, hopefully, will be encouraged by recent slight glimmers of success.

In the circumstances, it is useful to remind ourselves why economic reform, including painful austerity, is necessary. Simply put, for more than 40 years Jamaica mismanaged its economic affairs.

We created an unaffordably bloated state sector, sustained by borrowing, to the tune of 150 per cent of GDP. The flip side: little private investment and economic stagnation. We were forced to confront the fiscal crisis, and other distortions in the economy, when no one would lend us money, at least not at rates we could afford.

Successful quarterly reviews

The Government has, so far, successfully completed two quarterly reviews under its programme with the IMF, and the third, for the three months to the end of December, seems to be assured.

Further, after five consecutive quarters of real decline, the economy recorded a small up-tick, 0.5 per cent in the September quarter, and should record marginal growth for the overall 2013-14 fiscal year that ends in March. Indeed, the Government will almost certainly meet the IMF's target of a primary surplus of seven and a half per cent of GDP for the fiscal year, as part of the strategy for lowering its debt.

Just as important, the Parliament last year approved several bits of legislation to help create a more transparent and competitive economy in which the private sector is, genuinely, the engine of growth.

But as much as may have been accomplished, there is much - and much of it painful - to be done.

Squeeze recurrent spending

It is apparent that until the reforms take hold and investor confidence returns, the Government will be forced to squeeze recurrent spending and unload assets, even as it enhances the efficiency of its tax system, to meet fiscal targets. In fact, the IMF suggests that even with the existing programme, the Government is likely to have to find "further debt reduction" strategies to bring the debt to the programmed 96 per cent of GDP by 2020.

At the same time, there is more to do in tax reform, such as lowering the rates on personal income, broadening the base and bringing more products within the ambit of the general consumption tax. Public-sector and pension reforms - to create a streamlined and efficient civil service and have government employees contribute to their pensions - are outstanding.

These are, at the best of times, politically difficult undertakings. They will seem harder as the administration enters its third year in office and begins to see a general election on the not-so-far horizon.

But too much has been achieved for the Government to get cold feet. In this regard, it is important that Prime Minister Portia Simpson Miller deepens her so far-successful partnership with her finance minister, Peter Phillips.

Mrs Simpson Miller, in this respect, will have to resist the pressures of the populists and use her exceptional talent for communicating with the Jamaican people to keep us focused on the prize. We are confident she will do what is prudent.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.