KINGSTON, Jamaica, Gleaner – THE GOVERNMENT is beginning to get its critical economic pieces in their place. Last week, Finance Minister Dr Peter Phillips tabled an expenditure budget that, taking into the account the effects of inflation, projects spending at more than a fifth less than the previous fiscal year.
This sharp reduction (14 per cent in nominal terms) in expenditure benefits from the Government's recent restructuring of nearly J$900 billion in domestic debt. It, nonetheless, also suggests that, under the tutelage of the International Monetary Fund (IMF), our Government is finally appreciating what we have been preaching for a long time: that its debt of 140 per cent of GDP is unsustainable and that the Government can't borrow its way out of its problem. How deeply the Simpson Miller administration has absorbed this lesson will become clearer next week when Dr Phillips provides a detailed plan for financing the budget. A J$19-billion-tax package was previously announced, including his borrowing programme.
But as significant as these developments are, the budget would not be as credible in the absence of certainty about the economic support agreement with the IMF. Indeed, the failure to complete the pact, although the fund's staff had signed off on a four-year facility, reflected itself in the collapse of business confidence, leading to a nearly 12 per cent decline in the value of the Jamaican dollar in recent weeks.
