Economist warns Gov't against budget cuts in critical ministries
Published:Wednesday | August 17, 2011 | 12:00 AM
Edmond Campbell, Senior Staff Reporter
AS THE cash-strapped Bruce Golding administration huddled on Monday to carve out a Supplementary Estimates of Expenditure to be tabled in Parliament later this month, one economist is cautioning against cuts in the health, education and national security ministries.
Economist Dennis Chung suggested that these critical ministries could not withstand cuts from their already-thin budgets.
Finance Minister Audley Shaw, in a recent national broadcast, warned that no ministry, department or agency would be spared in order to accommodate several unplanned expenses.
Chung told The Gleaner that while the Government had no option but to slice the budgets of some ministries and agencies, this would only constitute a short-term solution.
He said in the medium to long term, a more prudent decision would be to re-engage the International Monetary Fund (IMF) with a view to negotiating a restructured agreement.
Suggesting that the country needed more breathing space at this time under the IMF programme, Chung called for a "more relaxed agreement that will allow the country to have some economic activity coming back".
He stressed that continued cuts in the public sector would lead to a contraction of the Jamaican economy.
"The rhetoric and the quantitative IMF targets alone are not going to cut it, we need to understand that economics is a social science that depends on human behaviour, and the only way people go out and spend money is not based on what they earn today but what they expect to earn," he asserted.
Gleaner guest columnist Darron Thomas said he had not heard any further comment from Shaw on an extended IMF agreement since he made the suggestion in his budget presentation earlier this year.
"Renegotiating the agreement to get a longer term usually means what is known as an extended fund facility," Thomas observed.
He said this facility would have tighter constraints than a standby arrangement.
"It's kind of counter intuitive to think we are going to get an extended fund facility with less stringent conditionalities," Thomas argued.
Commenting on the public sector rationalisation programme, Thomas said it was not "politically prudent" for the administration to cut employment in the public sector, given the closeness of a general election.
"I don't think you are going to see the civil service shrinking even though we have this rationalisation programme," he said.