Tough times ahead

• Shaw pleads for goodwill as Jamaica tackles challenging economic path

Gary Spaulding, Senior Gleaner Writer

Minister of Finance Audley Shaw yesterday appealed for goodwill among Jamaicans as he signalled that difficult times loom on the nation's economic landscape.

Shaw was addressing Jamaicans in a national broadcast as he sought to silence the chorus of claims that the Government had failed the International Monetary Fund (IMF) tests for the last two quarters.

However, even as he attempted to put a positive spin on the economic scenario, he warned that achieving the island's medium-term targets was going to be a headache.

"At this point in time, one of the medium-term targets that are of particular concern to the IMF and ourselves is the central government wage-to-GDP ratio," Shaw said.

The finance minister stressed that this wage-to-GDP ratio was not to be confused with the recently concluded seven per cent wage settlement.

"Rather, this is a medium-term target for the period ahead, up to March 2016," he said.

Shaw noted that at the end of the last fiscal year, the cost of central government wages was 10.7 per cent of GDP.

"However, this must be reduced to nine per cent of GDP by March 2016 under the fiscal responsibility legislation," he reiterated.

"We have come a long way, but there is still some distance to go," Shaw stressed. "It will require discipline, but we can do it."

He sought to reassure the nation that the Government was working on a tough but achievable plan to deal with the current fiscal challenges and to secure the medium-term programme.

"I know that your goodwill and support can be relied upon," the finance minister said.

This was preceded by Shaw's impassioned appeal for citizens to "band together and move with determination towards our ultimate goal - the building of a prosperous Jamaica and the realisation of a better life for all".

The finance minister characterised as "misconceptions" recent statements by Opposition Spokesman on Finance Dr Peter Phillips, former Finance Minister Dr Omar Davies and some outspoken financial analysts.

"Although I have shared various aspects of our progress with you, it is necessary for me to clear up some misconceptions and to inform you of some important issues that face us at this juncture," he asserted.

The finance minister claimed that there have been conflicting reports about the status of Jamaica's standby arrangement with the IMF on Jamaica's medium-term economic programme.

He described the IMF agreement as the centrepiece around which the medium-term programme is built, and a precondition for other multilateral support.

"Without it, Jamaica would not have had the necessary foreign reserves to have survived the deep dislocation caused by the worst economic crisis the world has known in modern history," he said.

However, Shaw was quick to stress that the medium-term programme was more than just an economic rescue programme that came at a period of crisis.

"The medium-term economic programme is the blueprint that points the way to building a credible foundation upon which our country can create a sustainable economy," he said.

The finance minister emphasised that safeguarding the programme had to be pursued within the context of the signs of a relapse in the global recovery, evidenced by recent developments in the United States and Europe.

"The possible impact of these on Jamaica and the measures needed to mitigate that impact have to be kept sharply within our focus," he warned.

For his part, Phillips welcomed Shaw's attempt to clear the clouds and promised that a fulsome response would be available when the Opposition examines the content of the finance minister's statement.

"I am pleased that he has recognised that there is a public responsibility to communicate with the populace," Phillips, who was overseas, told The Gleaner yesterday.

Finance Minister Audley Shaw says a plan of action is in place to safeguard fiscal operations and keep the medium-term programme on a sustainable path.

• A Green Paper presented on tax reform and intense discussions that must include the issue of granting of waivers will be held over the next six weeks. A White Paper will be tabled in Parliament in October.

• Offers are before the Government for the purchase of its shareholding in Clarendon Alumina Production and a decision should be made by the end of August.

• The rapidly escalating cost of government pensions has a significant impact on recurrent expenditure. Exhaustive studies on pension reform have been completed and a Green Paper outlining the proposed reforms will be tabled in September. This is expected to lead to a White Paper in January 2012.

• Dialogue has already started with public-sector unions to define a predictable way of determining a formula for wage settlements.