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EDITORIAL -JLP needs a finance thinker
Published: Sunday | January 5, 2014
It is time that Andrew Holness moves on from Audley Shaw and appoint a proper shadow finance minister.
For by now it should be obvious to the Jamaica Labour Party (JLP) leader that the interim arrangement he adopted in the aftermath of his re-election has not worked well. Critique of national economic policy demands more than his own talents appear capable of delivering.
But more important, two years into its new stint in opposition and three before a general election is due, it is important for the JLP to set about formulating credible alternative policies and casting itself as government in-waiting.
We are reinforced in this view by the Opposition leader's less than rigorous, patently narrow, and belated response to the Simpson Miller administration's revised letter of intent for its ongoing programme with the International Monetary Fund (IMF). He focused almost exclusively on the Government's signal that it was considering applying the general consumption tax (GCT) to petroleum products as part of its tax reform programme.
Mr Holness has moonlighted in the finance spokesman's job while waiting on Mr Shaw to make up his mind about a place in the Shadow Cabinet, having failed in his challenge two months ago for the JLP's top post.
Understandably, Mr Holness was circumspect in his approach to Mr Shaw, who, after all, received 53 per cent of the votes of JLP delegates. Moreover, Mr Shaw was the finance minister for the JLP's four years in government. He was touted for achieving relative exchange rate stability and a lowering of interest rates.
But there is much in Audley Shaw's stewardship that has been glossed over, not least of which was the dilly-dallying at the onset of the global financial melt-down of 2008, followed by the early collapse of a standby agreement with the IMF not long after it came into force in 2010.
No tax reform under Shaw
Indeed, that JLP administration, of which Mr Holness was a member and led briefly towards its end, failed to implement agreed tax reform and the fiscal austerity that it had agreed to. By the time a new agreement with the Fund was reached in early 2013, our debt was 150 per cent of gross domestic product (GDP); multilateral agencies had cut off financing and private capital markets were all but closed to Jamaica. The Jamaican currency, by some estimates, was overvalued by as much as 20 per cent.
It is against this backdrop that austerity is inevitable. The technical vestige of the effort is the requirement that the Government maintain a primary surplus of 7.5 per cent of GDP.
But even with a tax package of nearly J$16 billion at the start of the current fiscal year, the Government's revenue is running around J$9 billion, or five per cent behind projection. The administration has, however, maintained tight fiscal discipline and has been implementing market reforms, including initiatives that will sharply lower the rate of corporate income tax and make firms more competitive.
Mr Holness is right, the Government's fiscal policies are contractionary, which would be exacerbated by adding GCT to petroleum products.
He wants a government strategy for growth, by which, we suppose, he means something different from the broad reform of the economy, but which he did not identify. The situation requires clear thinking by the JLP. As he demonstrated with his recent Senate appointments, Mr Holness can find the talent.
EDITORIAL -JLP needs a finance thinker
Published: Sunday | January 5, 2014
It is time that Andrew Holness moves on from Audley Shaw and appoint a proper shadow finance minister.
For by now it should be obvious to the Jamaica Labour Party (JLP) leader that the interim arrangement he adopted in the aftermath of his re-election has not worked well. Critique of national economic policy demands more than his own talents appear capable of delivering.
But more important, two years into its new stint in opposition and three before a general election is due, it is important for the JLP to set about formulating credible alternative policies and casting itself as government in-waiting.
We are reinforced in this view by the Opposition leader's less than rigorous, patently narrow, and belated response to the Simpson Miller administration's revised letter of intent for its ongoing programme with the International Monetary Fund (IMF). He focused almost exclusively on the Government's signal that it was considering applying the general consumption tax (GCT) to petroleum products as part of its tax reform programme.
Mr Holness has moonlighted in the finance spokesman's job while waiting on Mr Shaw to make up his mind about a place in the Shadow Cabinet, having failed in his challenge two months ago for the JLP's top post.
Understandably, Mr Holness was circumspect in his approach to Mr Shaw, who, after all, received 53 per cent of the votes of JLP delegates. Moreover, Mr Shaw was the finance minister for the JLP's four years in government. He was touted for achieving relative exchange rate stability and a lowering of interest rates.
But there is much in Audley Shaw's stewardship that has been glossed over, not least of which was the dilly-dallying at the onset of the global financial melt-down of 2008, followed by the early collapse of a standby agreement with the IMF not long after it came into force in 2010.
No tax reform under Shaw
Indeed, that JLP administration, of which Mr Holness was a member and led briefly towards its end, failed to implement agreed tax reform and the fiscal austerity that it had agreed to. By the time a new agreement with the Fund was reached in early 2013, our debt was 150 per cent of gross domestic product (GDP); multilateral agencies had cut off financing and private capital markets were all but closed to Jamaica. The Jamaican currency, by some estimates, was overvalued by as much as 20 per cent.
It is against this backdrop that austerity is inevitable. The technical vestige of the effort is the requirement that the Government maintain a primary surplus of 7.5 per cent of GDP.
But even with a tax package of nearly J$16 billion at the start of the current fiscal year, the Government's revenue is running around J$9 billion, or five per cent behind projection. The administration has, however, maintained tight fiscal discipline and has been implementing market reforms, including initiatives that will sharply lower the rate of corporate income tax and make firms more competitive.
Mr Holness is right, the Government's fiscal policies are contractionary, which would be exacerbated by adding GCT to petroleum products.
He wants a government strategy for growth, by which, we suppose, he means something different from the broad reform of the economy, but which he did not identify. The situation requires clear thinking by the JLP. As he demonstrated with his recent Senate appointments, Mr Holness can find the talent.
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