Financially Speaking | The gods of reform are watching
Published:Thursday | March 3, 2016 | 12:00 AMLavern Clarke
By now, Bert van Selm likely would have stocked up on Pepto-Bismol, even while appealing to the gods of economic reform that past won't necessarily be prologue.
The Holness administration's first budget will be the clearest sign of whether the IMF rescue programme will stay on course for the one year remaining, or be knocked askew by tax populism.
Only five tests remain. That's not so bad, but only if no one remembers that the first and failed IMF programme cobbled together in 2010 was breached after passing the first three tests.
As the IMF's man in Jamaica, Dr van Selm would be working with finance minister-in-waiting Audley Shaw for the first time, but he would have known of the dilemma faced by his predecessor Gene Leon when the wheels of the JLP-negotiated standby agreement went off the rails under Shaw's watch.
The JLP has long been seen as the party of business, but at some point in 2010-11 its tendency towards populism began to emerge. One of its clearest manifestations of that flirtation was a wage deal that trampled on the targets of the IMF pact at a time when pay was supposed to be frozen.
Tried as he might, Dr Leon could see no path then for Jamaica to make the type of expenditure cuts needed to offset the costs equivalent to 2.3 per cent of GDP that the wage surrender created. Which meant that his bosses in Washington couldn't either.
'Man-a-Yard'
It was a tad embarrassing, given that Jamaica had been lauded as an example for its debt swap and austere reforms.
And now comes the ultra-popular $1.5m tax-free plan with some of the same potential.
Shaw has accepted the odd mantra of 'Man-a-Yard'. Who knows what that really means, but it is clearly cloaked in populism, even if somewhat dÈclassÈ. And it does not evoke confidence in someone who is supposed to be a financial steward.
Assuming his title is really meant to connote 'person in charge', his first big job will be a demonstration of his wizardry so as to a deliver a budget-neutral tax benefit, that is to say, the $12 billion to $16 billion that the $1.5m threshold plan is projected to cost is totally offset elsewhere in the budget.
A diversion of the gas tax is doable, but magical thinking on growth and jobs won't cut it. Those deliverables take serious and clear-eyed policies - and time - to conjure.
Meanwhile, April 1 is four weeks away. And van Selm might now be pondering whether he also needs a back-up supply of Tums. Or whether it will be enough to just sic EPOC on the JLP.
Shaw's second big test will come with his handling of the wage bill, which is required to contract to nine per cent of GDP. Everyone who is not outgoing Finance Minister Peter Phillips and other members
of the Simpson Miller administration believes that means cutting public sector jobs.
Indeed, in a reaction to a press report that appeared two days ahead of the election referencing 5,000 job cuts, the 'accounting officer' of the finance ministry again refuted the elimination of people. Only positions were on the chopping block, we are told.
Here's the odd thing about that release. The first person statement by 'I, the accounting officer' never identified the official by name. One presumes it was Financial Secretary Devon Rowe, and that he was trying to remain incognito.
Still, whosoever played the part of accounting officer, what the twilight denial continued to epitomise is that political cowardice wears neutral colours. That Phillips was as fearful of the fallout from cutting jobs, as Shaw will be.
Now we'll never know whether Phillips - who wants to be prime minister at some point in his lifetime - would have finally engineered those cuts. Those types of decisions tend to haunt political careers.
Shaw has the same dilemma, but for him this is an opportunity to be bold and to reclaim some of the confidence he lost from mismanaging the 2010 IMF agreement.
Bert, for one, would be grateful.