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Ken Chaplin
Tuesday, May 01, 2007
Finance and planning minister Omar Davies declared during his 2007-2008 budget presentation that it was not an election budget. General election is due by October this year. However, the trimmings of an election year budget were there.
Ken Chaplin
Indeed, the Opposition and the country on a whole has to monitor the $39-billion capital expenditure to ensure that taxpayers get value for money. In fact, since independence in 1962 there was never a budget during an election year that was not geared to the re-election of the government's party.
The government's strong points, according to Davies, are that it brought down the rate of inflation (the rate of increase of goods and services) to 6.6 per cent in the fiscal year ending March 31 this year. This was the lowest in 30 years. There was stability in the foreign exchange market, and the net international reserves (NIR), which is critical to the payment for imports, stood at a record US$2.329 billion. It would be good if all of this had been the productive effort of the country, but a great portion of it was in the form of loans.
The unemployment rate stood at 9.6 per cent in October last. What is of great concern is that 50 per cent of the unemployed are in the 20-34 age group and 20.2 per cent in the 20-24 age group. In the area of poverty the incidence in 2006 was 14.3 per cent. The Gross Domestic Product (GDP) - the value of goods and services produced - is one of the most critical factors in the economy because it indicates how well off the country is.
In 2006 the GDP was 2.5 per cent. Clearly, this growth is far below what is needed to create a healthy economy. A growth rate of at least 6 per cent is required. There is a proposed expenditure of $39 billion for capital projects, of which $14 billion has already been spent with Parliament's approval.
The public debt of $923.1 billion is hanging around the necks of Jamaicans like a millstone. Of the $380-billion budget, $203.6 billion has to be used for debt servicing. This has serious implications for the country in that we are not producing sufficient goods and services to reduce the debt significantly. The debt to GDP ratio stood at 130 per cent at the end of the financial year. The country is borrowing way above its capacity to produce and repay. The deficit of 5.4 per cent of GDP is considered high. A deficit of 3 per cent of GDP is considered ideal by economists. Davies also brought some good news, like the improved pensions for retired government workers, increased access to potable water supplies, more funding to small and medium-sized entrepreneurs and an increase in the number of students benefiting from grants through the Students Loan Bureau.
Audley Shaw, the Opposition spokesman on finance, was devastating in his response. He did not have to search too hard for material to blast the government's poor performance over the 18 years it has been in office. Although his budget speech bordered on electioneering, his statements were also factual. For example, he said that while the government was able to allocate $9 billion for a few days of World Cup Cricket, hundreds of people were dying of kidney disease because they could not afford dialysis treatment.
While there has been a marginal reduction in crime, the justice system is in crisis. The government has failed to deliver the primary responsibility of any government, which is to maintain public order. While the government boasts of super highways, small farmers cannot get their produce to market because of bad roads. Out of every dollar of taxes the government will pay, more than half of it will be used to service debt this year. Of a percentage of the total budget, 54 cents will go to pay debt service, 23 cents will go to pay government workers and 23 cents will be left over for everything else.
While the minister celebrates 2.5 per cent growth this year, Latin America grew at an average of 5 per cent and the global economy grew at over 6 per cent. In fact, with the exception of Guyana, Jamaica grew at a slower rate than every other Caribbean nation over the year, and even Haiti's growth rate was at Jamaica's level.
Putting forward what he described as a credible debt-management strategy, Shaw said that the size of the debt was a primary constraint on economic growth and development. Jamaica's massive debt burden is at the heart of a vicious cycle that depletes capital investment, social spending and employment while raising taxes, interest rates and instability. The Opposition believes that legal measures must be put in place to ensure debt reduction. Such measures should include constitutional caps on annual borrowing and debt as a percentage of GDP.
He said we should secure lending from multilateral agencies on Jamaica's terms; carry out a comprehensive audit of the government's assets; use the proceeds of PetroCaribe to pay down debt; secure a partnership with the private sector on debt and interest rate reduction; explore the issue of "Diaspora bonds" and develop an energy policy.
He also said we should carry out a comprehensive audit of the public sector operations; use the public education mechanism to seek voluntary tax compliance; broaden the base of investment and facilitate the expansion of venture capital financing; diversify the tourism sector; create an agricultural revolution, featuring the dedication of funds earned from the bauxite sector to fund agriculture; develop micro-enterprise credit and redevelop Kingston as the financial centre for the Caribbean.
Tuesday, May 01, 2007
Finance and planning minister Omar Davies declared during his 2007-2008 budget presentation that it was not an election budget. General election is due by October this year. However, the trimmings of an election year budget were there.
Ken Chaplin Indeed, the Opposition and the country on a whole has to monitor the $39-billion capital expenditure to ensure that taxpayers get value for money. In fact, since independence in 1962 there was never a budget during an election year that was not geared to the re-election of the government's party.
The government's strong points, according to Davies, are that it brought down the rate of inflation (the rate of increase of goods and services) to 6.6 per cent in the fiscal year ending March 31 this year. This was the lowest in 30 years. There was stability in the foreign exchange market, and the net international reserves (NIR), which is critical to the payment for imports, stood at a record US$2.329 billion. It would be good if all of this had been the productive effort of the country, but a great portion of it was in the form of loans.
The unemployment rate stood at 9.6 per cent in October last. What is of great concern is that 50 per cent of the unemployed are in the 20-34 age group and 20.2 per cent in the 20-24 age group. In the area of poverty the incidence in 2006 was 14.3 per cent. The Gross Domestic Product (GDP) - the value of goods and services produced - is one of the most critical factors in the economy because it indicates how well off the country is.
In 2006 the GDP was 2.5 per cent. Clearly, this growth is far below what is needed to create a healthy economy. A growth rate of at least 6 per cent is required. There is a proposed expenditure of $39 billion for capital projects, of which $14 billion has already been spent with Parliament's approval.
The public debt of $923.1 billion is hanging around the necks of Jamaicans like a millstone. Of the $380-billion budget, $203.6 billion has to be used for debt servicing. This has serious implications for the country in that we are not producing sufficient goods and services to reduce the debt significantly. The debt to GDP ratio stood at 130 per cent at the end of the financial year. The country is borrowing way above its capacity to produce and repay. The deficit of 5.4 per cent of GDP is considered high. A deficit of 3 per cent of GDP is considered ideal by economists. Davies also brought some good news, like the improved pensions for retired government workers, increased access to potable water supplies, more funding to small and medium-sized entrepreneurs and an increase in the number of students benefiting from grants through the Students Loan Bureau.
Audley Shaw, the Opposition spokesman on finance, was devastating in his response. He did not have to search too hard for material to blast the government's poor performance over the 18 years it has been in office. Although his budget speech bordered on electioneering, his statements were also factual. For example, he said that while the government was able to allocate $9 billion for a few days of World Cup Cricket, hundreds of people were dying of kidney disease because they could not afford dialysis treatment.
While there has been a marginal reduction in crime, the justice system is in crisis. The government has failed to deliver the primary responsibility of any government, which is to maintain public order. While the government boasts of super highways, small farmers cannot get their produce to market because of bad roads. Out of every dollar of taxes the government will pay, more than half of it will be used to service debt this year. Of a percentage of the total budget, 54 cents will go to pay debt service, 23 cents will go to pay government workers and 23 cents will be left over for everything else.
While the minister celebrates 2.5 per cent growth this year, Latin America grew at an average of 5 per cent and the global economy grew at over 6 per cent. In fact, with the exception of Guyana, Jamaica grew at a slower rate than every other Caribbean nation over the year, and even Haiti's growth rate was at Jamaica's level.
Putting forward what he described as a credible debt-management strategy, Shaw said that the size of the debt was a primary constraint on economic growth and development. Jamaica's massive debt burden is at the heart of a vicious cycle that depletes capital investment, social spending and employment while raising taxes, interest rates and instability. The Opposition believes that legal measures must be put in place to ensure debt reduction. Such measures should include constitutional caps on annual borrowing and debt as a percentage of GDP.
He said we should secure lending from multilateral agencies on Jamaica's terms; carry out a comprehensive audit of the government's assets; use the proceeds of PetroCaribe to pay down debt; secure a partnership with the private sector on debt and interest rate reduction; explore the issue of "Diaspora bonds" and develop an energy policy.
He also said we should carry out a comprehensive audit of the public sector operations; use the public education mechanism to seek voluntary tax compliance; broaden the base of investment and facilitate the expansion of venture capital financing; diversify the tourism sector; create an agricultural revolution, featuring the dedication of funds earned from the bauxite sector to fund agriculture; develop micro-enterprise credit and redevelop Kingston as the financial centre for the Caribbean.