Fiscal rules not enough to keep country's economy on track, says King
Published:Thursday | November 26, 2015 | 12:00 AMDaraine Luton
Despite Parliament having passed anti-'run wid it' laws last year to help safeguard the country's finances, leading business and civil-society interests said they are not convinced that future political administrations will abide by such legislation unless they are closely monitored by key stakeholders.
"The experience we have in Jamaica is that governments in the past have not been reluctant to violate legislation, break their own rules, and not adhere to laws," Dr Damien King, co-executive director of the Caribbean Policy Research Institute, said yesterday.
"We have observed, in our experience in Jamaica, that the consequence of fiscal irrespon-sibility is public indebtedness and serial fiscal crises. It is time to put that behind us and impose fiscal responsibility on those who exercise public resources in our name," King said.
Under the amended Financial Administration and Audit Act, which together with the Public Bodies Management and Accountability Act, forms the fiscal rules, the finance minister, as at the end of the 2017-2018 fiscal year, is required to take appropriate measures to attain a fiscal balance. This fiscal balance is as a percentage of GDP, which would allow the debt-to-GDP ratio to fall to 60 per cent or less by 2026.
REQUIRED TARGETS
It also outlines annual fiscal-balance targets that are required for the achievement of the debt-ceiling targets. The targets built into the bills mirror agreements set between Jamaica and the International Monetary Fund (IMF) under a four-year extended fund facility that was inked in 2013. The bills clearly define escape clauses, which would allow the suspension of the fiscal rules, with parliamentary approval for a specified period upon the occurrence of major adverse shocks such as a severe economic contraction.
King yesterday insisted that "it is not sufficient to pass legislation".
"What makes it effective is the accountability," he added.
"Somebody has to hold them accountable; somebody has to be observing when the laws are broken, publicising it, and then, ultimately, the public, with the information, can act upon it."
Yesterday, a number of stakeholders from the private sector, academia and civil society called on Prime Minister Portia Simpson Miller and Opposition Leader Andrew Holness to ensure that, notwithstanding the outcome of the next general election, certain items are given priority.
FIVE PILLARS
The five items for which commitment is being sought are fiscal responsibility, price stability, a social safety net, public-private-sector partnerships, and the ease of doing business.
King said the social safety net is important from a moral, humanitarian and even an economic point of view.
Under the extended fund facility with the IMF, Jamaica has committed to maintain a minimum social spending as a means of protecting the most vulnerable.
"Social spending is computed as the sum of central government spending on social-protection programmes as articulated in the central government Budget for a particular fiscal year. These programmes are funded by GOJ (Government of Jamaica) resources only and comprise conditional cash transfers to children 0-18 years and the elderly, youth employment programmes, the poor-relief programme for both indoor and outdoor poor; the school-feeding programme; and the basic-school subsidy," the letter of intent to the IMF states.
King said yesterday that there has been insufficient attention to all of these throughout our entire lives in Jamaica.
"Now that we have made a start, we have to make sure that these improvements are not an accident of one particular moment in time and one particular agreement with a multi[lateral]; that these go on to become embedded in how we govern Jamaica," King said.