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Dr Peter Phillips, the finance minister, as he has acknowledged, and ought to be obvious to anyone who appreciates the severity of Jamaica's fiscal situation, will have very little room within which to manoeuvre the Budget he will table in a matter of weeks. So, those who are insistent that Dr Phillips use robust counter-cyclical measures to stimulate the lagging economy are ensnared in a theoretical fantasy land that has no foundation in the national reality.
As in the case of Greece, Jamaica's problem, fundamentally, is the size if its national debt. At J$1.619 trillion, it is more than 130 per cent of gross domestic product. That is unsustainable.
Unless the Government - as it was able to persuade domestic lenders to do two years ago - gets bondholders to take a haircut on their instruments, more than 40 per cent of whatever Budget Dr Phillips presents will go towards debt servicing. After debt servicing, whatever is left over from all government revenue is likely to be sufficient to cover about two-thirds of the wages of people employed to the Government.
The upshot: The Government will have to borrow to foot the rest of its expenses. A spendthrift government will hanker for more debt, increasing possibility of deepening the crisis.
Moreover, Jamaica pays a high-risk premium on its debt, the servicing of which diverts capital away from investments in infrastructure that help to create the basis for economic growth.
The priority of Dr Phillips, therefore, must be to contain growth of the debt, which, even if the finance minister were not inclined to do, he would be constrained to pursue if Jamaica wants a new borrowing relationship with the International Monetary Fund. That, in the first instance, means containing spending, even as the Government, insofar as is possible, provides a cushion for the society's most vulnerable members.
The essential elements of this programme is breaking the growth of the public-sector wage bill, as well as reform of the state pension scheme so that employees contribute. Dr Phillips must also be rigorous about tax reform, to bring more people into the net, remove inefficiencies from the system, and encourage private-sector investment.
Pm must ensure national buy-in
If Dr Phillips is to pursue such a strategy, he must have the unequivocal support of Prime Minister Portia Simpson Miller, who must clearly signal to the country that these policies are no private frolic of the finance minister, but the considered strategy of the Government. In other words, Mrs Simpson Miller must expend some of her undoubted political capital to ensure national buy-in.
Mrs Simpson Miller should not assume that the limited fiscal space means a total absence of options. What, first, the situation demands is tight management, by civil servants and their political bosses, of public resources so that taxpayers get value for money.
The creative and efficacious use of policy is also important. The $4 billion the Government plans to spend on the Jamaica Emergency Employment Programme, if properly administered, could, for instance, deliver on some of the inner-city infrastructure refurbishment of the stalled Growth Inducement Strategy that was fashioned by the Planning Institute of Jamaica for the previous administration.
The point is that economic recovery is not only about throwing big wads of cash at prestige projects, or passing handouts to people.
As in the case of Greece, Jamaica's problem, fundamentally, is the size if its national debt. At J$1.619 trillion, it is more than 130 per cent of gross domestic product. That is unsustainable.
Unless the Government - as it was able to persuade domestic lenders to do two years ago - gets bondholders to take a haircut on their instruments, more than 40 per cent of whatever Budget Dr Phillips presents will go towards debt servicing. After debt servicing, whatever is left over from all government revenue is likely to be sufficient to cover about two-thirds of the wages of people employed to the Government.
The upshot: The Government will have to borrow to foot the rest of its expenses. A spendthrift government will hanker for more debt, increasing possibility of deepening the crisis.
Moreover, Jamaica pays a high-risk premium on its debt, the servicing of which diverts capital away from investments in infrastructure that help to create the basis for economic growth.
The priority of Dr Phillips, therefore, must be to contain growth of the debt, which, even if the finance minister were not inclined to do, he would be constrained to pursue if Jamaica wants a new borrowing relationship with the International Monetary Fund. That, in the first instance, means containing spending, even as the Government, insofar as is possible, provides a cushion for the society's most vulnerable members.
The essential elements of this programme is breaking the growth of the public-sector wage bill, as well as reform of the state pension scheme so that employees contribute. Dr Phillips must also be rigorous about tax reform, to bring more people into the net, remove inefficiencies from the system, and encourage private-sector investment.
Pm must ensure national buy-in
If Dr Phillips is to pursue such a strategy, he must have the unequivocal support of Prime Minister Portia Simpson Miller, who must clearly signal to the country that these policies are no private frolic of the finance minister, but the considered strategy of the Government. In other words, Mrs Simpson Miller must expend some of her undoubted political capital to ensure national buy-in.
Mrs Simpson Miller should not assume that the limited fiscal space means a total absence of options. What, first, the situation demands is tight management, by civil servants and their political bosses, of public resources so that taxpayers get value for money.
The creative and efficacious use of policy is also important. The $4 billion the Government plans to spend on the Jamaica Emergency Employment Programme, if properly administered, could, for instance, deliver on some of the inner-city infrastructure refurbishment of the stalled Growth Inducement Strategy that was fashioned by the Planning Institute of Jamaica for the previous administration.
The point is that economic recovery is not only about throwing big wads of cash at prestige projects, or passing handouts to people.