Fayval Williams | Jamaica’s macroeconomic fundamentals – best in 50 years

There has never hitherto been a single period in Jamaica’s economic history where all our macroeconomic fundamentals have trended in a positive direction simultaneously. There have been times when one or a few major indicators have shown creditable performance for a brief duration but never before could we say for any prolonged period that at the same time:

• our debt-to-GDP ratio is at its lowest level in 47 years and continues to decline;

• both unemployment and inflation continue to be in the low single digits;

• we currently have 12 consecutive quarters of economic growth which is the second longest stretch of unbroken economic expansion in our history;

• exchange rate volatility has been reduced significantly and;

• we currently have record levels of Net International Reserves (NIR) of over US$5 billion.

In addition to the above, there has never been a period where no new net taxes have been levied on the Jamaican people for seven consecutive years, as a result of the change in our fiscal dynamics which has enabled us to maximise on the efficiency of revenue collection with less reliance on external resources. With the exception of the initial shock of COVID-19 in fiscal year 2020/21, all of these years have recorded a surplus, juxtaposed against the previous 15 years of fiscal deficits.

The achievement of this unprecedented level of macro stability has come at great sacrifice through tremendous reform and adhering fastidiously to the tenets of fiscal responsibility, but it is not intended to be an end in itself. The perceived disproportionate focus on macroeconomic and fiscal stability over the last dozen years has emerged because of its relative unfamiliarity in the Jamaican experience. For the first five decades of our Independence, we grew accustomed to spending more than we earned, borrowing to fill the gap. Rapid expansion of the national debt, double digit inflation, high unemployment and excessive volatility in our economic output (a quarter of expansion was normally followed by several quarters of decline) was the equivalent to taking one step forward but several steps back.

ENTRENCHED STABILITY

Today, we have so much entrenched stability in the Jamaican economy that these concerns have been lessened significantly; people don’t talk about them as often. However, this level of stability has provided a launchpad for further economic growth and development. When we put our fundamentals in order, the people benefit. Using the debt-to-GDP ratio for example, the Government has managed its finances in such a way so that the pace of debt accumulation has decelerated considerably. The stabilization of the debt stock, combined with the expansion in economic output has enabled more resources to be put to critical development priorities.

Fewer cents of every tax dollar collected are now devoted to meeting our interest costs every year.

Just 20 years ago, 70 cents of every dollar went to meeting interest costs which was extremely burdensome to the people. Today that figure is less than 15 cents of every dollar, which means that the relative burden of debt repayment has become less onerous and more manageable.

With the opening up of more fiscal space that has been provided by reducing the debt burden in relative terms, the Government has been able to:

• Increase retirement pension benefits under the National Insurance Scheme (NIS), with increases ranging from 23 per cent to 76 per cent.

• Cumulatively double the minimum wage from $6,200 per week in 2016 to $15,000 per week in 2024.

• Enable an unprecedented rise in public sector wages which represents an investment in our human resources of over $200 Billion; and

• Increase our capital expenditure budget, which has more than tripled from $42 billion in 2016/2017 to $80 billion in 2025/2025.

IMPROVEMENT TO PHYSICAL INFRASTRUCTURE

An increase in capital expenditure has enabled the Government to undertake several improvements to our physical infrastructure including:

• Increasing the number of housing starts by over 30,000 between 2016 and 2023

• Building out public health expenditure by investing in upgrades to 10 health centres and four hospitals over the next three years

• Acquiring 100 new electric buses for the JUTC fleet, with provisions for more over the next few years

• Acquiring 100 new garbage trucks

• Continuing to invest in our island-wide road infrastructure through the building of new roads and the upgrade of existing roads under the SPARK programme, which is financed entirely from domestic resources

Moreover, the Government was able to provide social and health-related support in response to the COVID-19 pandemic to the tune of $40 billion from 2020 to 2022. The importance of fiscal sustainability was brought into even sharper focus with this crisis as it taught us to always have sufficient buffers to draw upon in the event of exogenous shocks.

None of these would have been possible without our macroeconomic successes, particularly our efforts in debt reduction and fiscal sustainability. Our recent achievement of a 47-year low debt-to-GDP has enabled us to utilise more of our resources for the Jamaican people. In a single decade, our debt as a percentage of GDP has been halved from 147 per cent to 74 per cent today. This lesson in our continuing economic history is instructive. Constrained by such a heavy debt burden for a generation, the country was not able to invest in these aforementioned items of expenditure, as ordinary as they might seem to some people. Imagine what could have been done during that entire period and how that would have positively impacted the trajectory of past generations. This is, all things considered, an extraordinary achievement.

Macroeconomic stability is not a destination. That much is true. It is a journey and we still have some way to go to get more of the results we want, not only for those of us today but future generations. For that reason, we must stay the course while ensuring that the dividends of macroeconomic stability are utilised for the benefit of Jamaicans.

Fayval Williams is the minister of finance and the public service. Send feedback to columns@gleanerjm.com