That Bitter Medicine! Here Are Jamaica’s Top 4 Pending Economic Issues

This post is a part of the series, Election Economics 101Exploring issues of money, the upcoming general elections (in Jamaica) and the relationship between the two. Stay tuned as we discuss some of the hot topics that you should be concerned about during this time.

If you watched Prime Minster Andrew Michael Holness announce the date for the next General Election in Jamaica, and listened to his speech, you would have heard, behind all the party music, bell-ringing, and chanting for him to call the date, a serious effort to touch on the issues that will be affecting the people of Jamaica going forward.

Election date announcement in Mandeville - 2011

In his speech, he made reference to his grandmother administering the bitter medicine (eucalyptus oil) and how despite his resistance, the medicine was good for his cold. If it is still not clear to you what he was getting at (whether you believe he dealt with the issues or not), it should be clear at the end of this series. The Most Honourable Prime Minister was hinting at some bitter medicine that Jamaica will need to take in the short term to put the country in a better position going forward.

Background – Where It All Started

On January 13, 2010, the former Prime Minister of Jamaica, the Hon. Bruce Golding outlined that there would be some significant changes as the country was embarking on a possible agreement with the International Monetary Fund (IMF).

Coming out of that broadcast, he said, “Jamaica has agreed to an intensive and extensive programme of monitoring and surveillance by the International Monetary Fund (IMF), to ensure that it meets the targets of the new loan agreement”

2010 IMF-WORLD BANK SPRING MEETINGS

His national broadcast to the nation also highlighted that Jamaica will be required to introduce legislation to establish a Framework, in which the Government will have to present targets to Parliament, and will be held accountable for its performance in relation to those targets.

Why Did The Country Do This?

As the former Prime Minister said, “The current economic climate has forced the Government to turn to the IMF and other multilateral institutions for help, to plug the hole resulting from the drop in foreign exchange flows and the fall-off in revenues.”

The Areas Of Focus

Coming out of his address, former Prime Minister Bruce Golding made clear some areas of that would have to be investigated, addressed, and monitored.  Some of these areas specially mentioned to be monitored include;

  1. The size and cost of Government  – The Public Sector Transformation Unit would be working vigorously on the programme to reduce and make changes
  2. Waivers – will be drastically curtailed. All existing incentives will be reviewed and where they are no longer necessary, they will be withdrawn.
  3. The Central Treasury Management System – improved cash management. Government will have access and sight of all its cash at one time and be able to make payments as are appropriate.
  4. Tax Administration Programme

Additionally, he also mentioned some other areas, which would need our attention, and these areas have now evolved to become the four medium term fiscal targets of government (as at November 2011).

The Top 4 Immediate Issues To Be Addressed

When Prime Minister Andrew Holness made his election date announcement speech, the bitter medicine (and things the government avoided doing) he was making reference to, are these top 4 issues that are now pending and need to be resolved. These are the fiscal goals as established in the fiscal responsibility framework legislation passed by Parliament in 2010 and the issues need to be resolved to continue ongoing discussions with the International Monetary Fund (IMF) on the country’s Standby Agreement.

The four medium term fiscal targets of government are:

  1. Tax reform
  2. Public sector pension reform,
  3. The sale of Clarendon Alumina Partners (CAP) and
  4. Public sector wage issues

We will cover these issues individually to further understand what each means and the impact of each. However I will provide you with a summary of each below:

  • Tax reform – The main focus of the Tax Administration Programme has been described as “enforcement and collection”. “People who owe taxes must pay their taxes! It is more TAXES we want – not more TAXATION”.
  • Public sector pension reform – The Public Sector Transformation Unit describes it as follows:

“The current national and global imperatives have impelled the Government of Jamaica to accelerate the modernisation and restructuring of the public sector to become leaner, more efficient, flexible, responsive and accountable. The rationalization of the public sector will demand a radical restructuring of established organizations and systems, including a review of their mandates and related objectives, introduction of incentives, development of an accountability framework, decentralization of authority and rationalization the organizational culture”.- Ministry Paper No. 114, “Strategy for the Restructuring of the Public sector

  •  The sale of Clarendon Alumina Partners (CAP) – The government, through CAP, owns 45% of the Jamalco alumina plant. What was once considered a strategic investment has become a heavy burden on taxpayers.
  • Public sector wage issues – In 2009 when the Government entered into the IMF agreement, the wage to GDP ratio was 11.75 per cent. The agreement with the IMF is that wages should be 9.5 per cent of GDP by 2015, and in the fiscal responsibility framework, it should reach nine per cent by 2016.

These are the top four economic issues that need to be resolved for Jamaica to continue its Standby Agreement with the IMF and meet its medium term fiscal targets.

Were you aware of these issues? How will these issues affect you?

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