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Peter Phillips' journey into 2014
Published: Sunday | January 12, 2014
Minister of Finance Dr Peter Phillips - File
Aubyn Hill, Contributor
"The end of 2013 was certainly better than the beginning," declared Minister of Finance Dr Peter Phillips, as we started an extensive review of 2013 and some prospects for 2014.
Jamaicans will recall that on taking office after the December 29, 2011 election, which the People's National Party (PNP) won with a two-thirds majority, the leader, Mrs Portia Simpson Miller - and Phillips in particular - came under heavy fire for taking what seemed to be ages to arrive at an agreement with the International Monetary Fund (IMF).
While Jamaicans were champing at the bit and criticising the finance minister, and when even his ministerial colleagues were giving him a wide berth with their deafening silence, he was being put through the negotiating and economic wringer by the IMF.
"Last year this time we were engaged in the most torrid negotiations with the IMF, and Jamaica had to use all its geopolitical resources to bring to bear on the Fund to arrive at a reasonable programme for the country," said Phillips when we met at the end of last month.
That frank recollection suggests that the IMF wanted even more stringent measures put in place to right the abject and perennial mismanagement of the Jamaican economy over more than 40 years.
No doubt the Fund wanted an even more rapid correction of our unsustainable 140 per cent debt-to-GDP position.
The Fund knew, the minister and his Cabinet colleagues knew, and most of Jamaica knew that the more than J$1.7 trillion debt had to be cut substantially for the country to get back on some sort of sound economic footing.
Phillips' arduous job was to lead his negotiating team to arrive at an Extended Fund Facility (EFF) arrangement with the IMF that would not choke us to death socially and fiscally while reducing the national debt.
TAKING ABUSE WHILE KEEPING A REALISTIC FOCUS
For the first four months of 2013 until the Executive Board of the Fund approved the EFF arrangement to support Jamaica's economic reform programme, Peter Phillips would have been going through hell from all sides.
He no doubt had to suffer more than a modicum of ignominy before the Fund because the previous Jamaica Labour Party (JLP) administration had broken the deal it had brokered with such pain and measured goodwill.
Multilateral lending agencies such as the IMF, Inter-American Development Bank and the World Bank deal with countries - not particular administrations of whatever political parties citizens of these countries chose.
Peter Phillips' team ran into a saw of scepticism and distrust which made the negotiations "torrid".
Some good - and developing realism on the part of the IMF - may have come from the failure of the previous administration to keep its word on capping public-sector salaries, in that the Fund agreed to push that issue down the road to 2016. All things being equal, the next general election will be called before that date.
My discussion with Phillips led me to the impression that whatever his positions on many matters were before taking on the country's finance portfolio, his negotiations with the IMF in particular among the multilateral lenders was a wake-up call and a solid education.
Whatever as a politician he may have thought of Jamaica's fiscal state, and no matter how as a former senior non-finance minister in Cabinet he would have argued and even demanded more 'government' money for the ministries he led, the IMF team would have introduced him to a merciless realism about the deleterious state of the Jamaican economy he had inherited as the new minister of finance.
It was clear to me that Phillips got the message and is committed to that new realism. He knows that Jamaica has no choice.
He knows what will be the price of us breaking those commitments - it will be an unmitigated disaster.
Phillips also knows we have no other borrowing alternatives and we have to make this programme work. His realism is almost fierce, and it is rock solid.
That realism has shaved off him much of his unwillingness to face reality and tell the truth - an unwillingness so many politicians harbour.
Phillips shared that: "The Caribbean (multilaterals see and prefer to deal with our group of small states as one economic entity) operates as if the world owes us something, but there is no longer a Cold War providing political axis with which we can align.
"Also," he argued, "too much time has passed between independence and now to make it reasonable for us to continue to engage in mendicancy rather than self-management."
CAUTION, OPTIMISM AND KEEPING COMMITMENTS
The minister of finance knows the depth of sacrifice that Jamaicans have had to make, and will have to continue to make, over the foreseeable future.
He recognises the contribution and sacrifice of unions and their members, politicians of both parties, bankers who are bearing the brunt of the National Debt Exchange, businessmen, public-sector workers, and the ordinary citizens who have great difficulty in making ends meet.
But he highlighted his realism - if not fear - when he commented that, "Last year between January and March everybody knew that the survival of the country depended on Jamaica securing the EFF from the Fund. The irony and paradox is that many believe that the threat to our existence has disappeared. It has not."
Phillips continued: "Our debt is still far too high, growth is too low and nobody is willing to give us a bly. We have to stay the course to our own success." His message couldn't be clearer.
In all his press to be realistic about Jamaica's economic position, Phillips had some achievements which brought him a sense of accomplishment in 2013.
He stated that all major challenges of the EFF have been undertaken, made public and have been accepted. The country has recorded a small degree of growth but it is a good start. Inflation has been contained in spite of the depreciating dollar - maybe even to single digit for the year.
The Net International Reserves recorded an uptick in the third fiscal quarter due to increasing tourist arrivals, and the Government drove a very aggressive legislative agenda which passed broad fiscal and tax reforms, fiscal incentives changes and the charities bill.
The Tax Administration Jamaica was converted into a semi-autonomous body, while the Customs Department became an independent agency, and the Government wrote off long outstanding and unpayable tax debts. These are all commitments under the EFF that have been kept.
In early 2014 the legislative focus will be on the Omnibus Banking Act and the Fiscal Rules.
THE GROWTH AGENDA AND RESTORING CREDIBILITY
Peter Phillips speaks intently about achieving sustainable and a higher level of growth as the only real antidote to Jamaica's unsustainable high debt and economic decay.
His four main challenges are also the four main areas of opportunity, and include increasing government efficiency to make it easier to do business in Jamaica. He also believes that our US$2.5 billion annual petroleum import bill is not sustainable and has to be reduced.
In this regard, Phillips needs to get his Cabinet colleagues to push legislation to have wheeling implemented as government policy - not keep it as an option of the Jamaica Public Service Company and Office of Utilities Regulation.
Phillips sees an improved education system as being promoted by the man in charge of that ministry, Ronald Thwaites, and making people feel more secure in the country as challenges and opportunities for growth in the near and longer term future.
As a linchpin of his unequivocal realism, Phillips has learned a great lesson from the mistakes of the JLP administration with the IMF and other multilateral lenders - Jamaica must keep its commitments to them.
He is firm in his resolve and belief that "maintaining credibility will come by doing what we are committed to do under the EFF agreement with the IMF".
Phillips knows we have a far way to go to win back that credibility with our foreign partners, and without solid growth he and the Government will lose credibility with Jamaican voters.
Published: Sunday | January 12, 2014
Minister of Finance Dr Peter Phillips - File
Aubyn Hill, Contributor
"The end of 2013 was certainly better than the beginning," declared Minister of Finance Dr Peter Phillips, as we started an extensive review of 2013 and some prospects for 2014.
Jamaicans will recall that on taking office after the December 29, 2011 election, which the People's National Party (PNP) won with a two-thirds majority, the leader, Mrs Portia Simpson Miller - and Phillips in particular - came under heavy fire for taking what seemed to be ages to arrive at an agreement with the International Monetary Fund (IMF).
While Jamaicans were champing at the bit and criticising the finance minister, and when even his ministerial colleagues were giving him a wide berth with their deafening silence, he was being put through the negotiating and economic wringer by the IMF.
"Last year this time we were engaged in the most torrid negotiations with the IMF, and Jamaica had to use all its geopolitical resources to bring to bear on the Fund to arrive at a reasonable programme for the country," said Phillips when we met at the end of last month.
That frank recollection suggests that the IMF wanted even more stringent measures put in place to right the abject and perennial mismanagement of the Jamaican economy over more than 40 years.
No doubt the Fund wanted an even more rapid correction of our unsustainable 140 per cent debt-to-GDP position.
The Fund knew, the minister and his Cabinet colleagues knew, and most of Jamaica knew that the more than J$1.7 trillion debt had to be cut substantially for the country to get back on some sort of sound economic footing.
Phillips' arduous job was to lead his negotiating team to arrive at an Extended Fund Facility (EFF) arrangement with the IMF that would not choke us to death socially and fiscally while reducing the national debt.
TAKING ABUSE WHILE KEEPING A REALISTIC FOCUS
For the first four months of 2013 until the Executive Board of the Fund approved the EFF arrangement to support Jamaica's economic reform programme, Peter Phillips would have been going through hell from all sides.
He no doubt had to suffer more than a modicum of ignominy before the Fund because the previous Jamaica Labour Party (JLP) administration had broken the deal it had brokered with such pain and measured goodwill.
Multilateral lending agencies such as the IMF, Inter-American Development Bank and the World Bank deal with countries - not particular administrations of whatever political parties citizens of these countries chose.
Peter Phillips' team ran into a saw of scepticism and distrust which made the negotiations "torrid".
Some good - and developing realism on the part of the IMF - may have come from the failure of the previous administration to keep its word on capping public-sector salaries, in that the Fund agreed to push that issue down the road to 2016. All things being equal, the next general election will be called before that date.
My discussion with Phillips led me to the impression that whatever his positions on many matters were before taking on the country's finance portfolio, his negotiations with the IMF in particular among the multilateral lenders was a wake-up call and a solid education.
Whatever as a politician he may have thought of Jamaica's fiscal state, and no matter how as a former senior non-finance minister in Cabinet he would have argued and even demanded more 'government' money for the ministries he led, the IMF team would have introduced him to a merciless realism about the deleterious state of the Jamaican economy he had inherited as the new minister of finance.
It was clear to me that Phillips got the message and is committed to that new realism. He knows that Jamaica has no choice.
He knows what will be the price of us breaking those commitments - it will be an unmitigated disaster.
Phillips also knows we have no other borrowing alternatives and we have to make this programme work. His realism is almost fierce, and it is rock solid.
That realism has shaved off him much of his unwillingness to face reality and tell the truth - an unwillingness so many politicians harbour.
Phillips shared that: "The Caribbean (multilaterals see and prefer to deal with our group of small states as one economic entity) operates as if the world owes us something, but there is no longer a Cold War providing political axis with which we can align.
"Also," he argued, "too much time has passed between independence and now to make it reasonable for us to continue to engage in mendicancy rather than self-management."
CAUTION, OPTIMISM AND KEEPING COMMITMENTS
The minister of finance knows the depth of sacrifice that Jamaicans have had to make, and will have to continue to make, over the foreseeable future.
He recognises the contribution and sacrifice of unions and their members, politicians of both parties, bankers who are bearing the brunt of the National Debt Exchange, businessmen, public-sector workers, and the ordinary citizens who have great difficulty in making ends meet.
But he highlighted his realism - if not fear - when he commented that, "Last year between January and March everybody knew that the survival of the country depended on Jamaica securing the EFF from the Fund. The irony and paradox is that many believe that the threat to our existence has disappeared. It has not."
Phillips continued: "Our debt is still far too high, growth is too low and nobody is willing to give us a bly. We have to stay the course to our own success." His message couldn't be clearer.
In all his press to be realistic about Jamaica's economic position, Phillips had some achievements which brought him a sense of accomplishment in 2013.
He stated that all major challenges of the EFF have been undertaken, made public and have been accepted. The country has recorded a small degree of growth but it is a good start. Inflation has been contained in spite of the depreciating dollar - maybe even to single digit for the year.
The Net International Reserves recorded an uptick in the third fiscal quarter due to increasing tourist arrivals, and the Government drove a very aggressive legislative agenda which passed broad fiscal and tax reforms, fiscal incentives changes and the charities bill.
The Tax Administration Jamaica was converted into a semi-autonomous body, while the Customs Department became an independent agency, and the Government wrote off long outstanding and unpayable tax debts. These are all commitments under the EFF that have been kept.
In early 2014 the legislative focus will be on the Omnibus Banking Act and the Fiscal Rules.
THE GROWTH AGENDA AND RESTORING CREDIBILITY
Peter Phillips speaks intently about achieving sustainable and a higher level of growth as the only real antidote to Jamaica's unsustainable high debt and economic decay.
His four main challenges are also the four main areas of opportunity, and include increasing government efficiency to make it easier to do business in Jamaica. He also believes that our US$2.5 billion annual petroleum import bill is not sustainable and has to be reduced.
In this regard, Phillips needs to get his Cabinet colleagues to push legislation to have wheeling implemented as government policy - not keep it as an option of the Jamaica Public Service Company and Office of Utilities Regulation.
Phillips sees an improved education system as being promoted by the man in charge of that ministry, Ronald Thwaites, and making people feel more secure in the country as challenges and opportunities for growth in the near and longer term future.
As a linchpin of his unequivocal realism, Phillips has learned a great lesson from the mistakes of the JLP administration with the IMF and other multilateral lenders - Jamaica must keep its commitments to them.
He is firm in his resolve and belief that "maintaining credibility will come by doing what we are committed to do under the EFF agreement with the IMF".
Phillips knows we have a far way to go to win back that credibility with our foreign partners, and without solid growth he and the Government will lose credibility with Jamaican voters.
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