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By Al Edwards
Friday, October 16, 2009
Grace Kennedy's Chief Operating Officer Don Wehby is calling for a fundamental change in the way the Jamaican economy operates and is urging that more emphasis be placed on increasing growth and competitiveness.
Don Wehby
Speaking at the Jamaica Manufacturers' Association's (JMA's) 41st Annual Awards Banquet held at the Hilton Kingston Hotel, he said that the Jamaican economy has been faced with huge challenges and has not been achieving the high growth rate consistent with other emerging markets.
Wehby said : "Over the last five years, Trinidad & Tobago's GDP grew at an average rate of 9.7 per cent; Barbados grew at 3.6 per cent and for the same period Jamaica grew at an average of 1.7 per cent. One of the biggest factors is our very high public debt - now at around J$1.2 trillion - more than quadrupled what it was ten years ago.
In 1990, the total public debt was $43.2 billion, in 1997, it was $221.3 billion; in 2007, it was $990.8 billion. It means that 54 cents of every dollar goes towards payment of the debt."
The Grace senior executive attributes the rapid debt accumulation to consistently missing fiscal targets and borrowing to pay for the shortfall; low rates of growth; the strain of contingent liabilities and loss-making public bodies such as Air Jamaica and the Sugar Company of Jamaica and, of course, the financial meltdown of the 90s, better known as FINSAC.
By June 30, 2000, the FINSAC debt was estimated to be approximately 40 per cent of GDP.
"All of this debt has pushed our budgeted interest costs, and therefore our total expenditure, to an extremely challenging level. This reduces the funds that we can spend on critical social services," added Wehby.
Must balance the budget
The former minister without portfolio went on to stress the importance of balancing the budget. He made it clear that the country must increase its productivity, demonstrate fiscal discipline and control the national debt.
"Therefore, we absolutely have to balance the budget and reduce our borrowing. This direction is embodied in the current administration's comprehensive public sector reform programme, which has received support from the various multilateral development partners. The components of this reform are:
1. Comprehensive tax reform (To make the tax system simpler, more equitable, more efficient and more competitive).
2. Increasing growth and competitiveness (By encouraging foreign direct investment and reducing bureaucracy. Also streamline the approvals processes. Roll out the red carpet, not the red tape).
3. Rationalisation of public bodies by divesting state-owned assets and enterprises which do not form part of our critical service obligations to the people. These can be more effectively developed and operated with private capital and under private management.
4. Managing the public sector wage bill by the modernisation of the public sector. There should be less people, but pay them more. It is also important to improve the productivity of public sector wage earners."
Controlling public sector balances and debt
A substantial portion of public debt is generated outside the budget, and deficits from public sector enterprises have accounted for a big part of overall fiscal deficits.
"Therefore it is imperative that we increase transparency over public sector accounts to improve control of balances and debt. While I do not wish to comment much on the current negotiations with the IMF, having been close to the numbers, I believe that it is imperative that we reach an agreement.
"The international capital markets remain closed and the current financial crisis has hit us hard. The IMF approval and support of Jamaica's medium-term macro-economic framework is important for confidence both locally and internationally. The multilaterals have clearly stated the importance of our agreement," said Wehby.
Friday, October 16, 2009
Grace Kennedy's Chief Operating Officer Don Wehby is calling for a fundamental change in the way the Jamaican economy operates and is urging that more emphasis be placed on increasing growth and competitiveness.
Don Wehby Speaking at the Jamaica Manufacturers' Association's (JMA's) 41st Annual Awards Banquet held at the Hilton Kingston Hotel, he said that the Jamaican economy has been faced with huge challenges and has not been achieving the high growth rate consistent with other emerging markets.
Wehby said : "Over the last five years, Trinidad & Tobago's GDP grew at an average rate of 9.7 per cent; Barbados grew at 3.6 per cent and for the same period Jamaica grew at an average of 1.7 per cent. One of the biggest factors is our very high public debt - now at around J$1.2 trillion - more than quadrupled what it was ten years ago.
In 1990, the total public debt was $43.2 billion, in 1997, it was $221.3 billion; in 2007, it was $990.8 billion. It means that 54 cents of every dollar goes towards payment of the debt."
The Grace senior executive attributes the rapid debt accumulation to consistently missing fiscal targets and borrowing to pay for the shortfall; low rates of growth; the strain of contingent liabilities and loss-making public bodies such as Air Jamaica and the Sugar Company of Jamaica and, of course, the financial meltdown of the 90s, better known as FINSAC.
By June 30, 2000, the FINSAC debt was estimated to be approximately 40 per cent of GDP.
"All of this debt has pushed our budgeted interest costs, and therefore our total expenditure, to an extremely challenging level. This reduces the funds that we can spend on critical social services," added Wehby.
Must balance the budget
The former minister without portfolio went on to stress the importance of balancing the budget. He made it clear that the country must increase its productivity, demonstrate fiscal discipline and control the national debt.
"Therefore, we absolutely have to balance the budget and reduce our borrowing. This direction is embodied in the current administration's comprehensive public sector reform programme, which has received support from the various multilateral development partners. The components of this reform are:
1. Comprehensive tax reform (To make the tax system simpler, more equitable, more efficient and more competitive).
2. Increasing growth and competitiveness (By encouraging foreign direct investment and reducing bureaucracy. Also streamline the approvals processes. Roll out the red carpet, not the red tape).
3. Rationalisation of public bodies by divesting state-owned assets and enterprises which do not form part of our critical service obligations to the people. These can be more effectively developed and operated with private capital and under private management.
4. Managing the public sector wage bill by the modernisation of the public sector. There should be less people, but pay them more. It is also important to improve the productivity of public sector wage earners."
Controlling public sector balances and debt
A substantial portion of public debt is generated outside the budget, and deficits from public sector enterprises have accounted for a big part of overall fiscal deficits.
"Therefore it is imperative that we increase transparency over public sector accounts to improve control of balances and debt. While I do not wish to comment much on the current negotiations with the IMF, having been close to the numbers, I believe that it is imperative that we reach an agreement.
"The international capital markets remain closed and the current financial crisis has hit us hard. The IMF approval and support of Jamaica's medium-term macro-economic framework is important for confidence both locally and internationally. The multilaterals have clearly stated the importance of our agreement," said Wehby.