“Urgent action”. Those two words help to summarise what some top officials of the Institute of Chartered Accountants of Barbados (ICAB) believe should be taken in Barbados to put the country’s economic house in order.
“To achieve the target growth of two per cent by 2015 we certainly require urgent action on several fronts, including boosting investor confidence, greater efficiency in the legal system, increased productivity in the public sector and reform, especially in our state enterprises,” was the way Roger Arthur, ICAB’s president, put it while announcing the results of a survey that showed low confidence in the authorities’ management of the economy.
But there is something else the accountants want the Freundel Stuart administration to do: seek out and utilise the positive aspects of the ongoing International Monetary Fund (IMF) programmes in the region, including Jamaica.
Should the government follow ICAB’s advice, the first person in Kingston, it would have to talk to would be Dr Peter Phillips, Jamaica’s minister of finance.
Coincidentally, Phillips was in New York City recently to give United States and Jamaican investors and Wall Street specialists a report card on his country’s performance now that its IMF programme has switched to high gear.
Speaking at a special luncheon in Manhattan given by the Jamaican-American Chamber of Commerce, Phillips painted a picture of his country’s pathway to economic stability. And while he stopped far short of suggesting that the economy was firing on all cylinders, he indicated that his birthplace was turning the proverbial corner.
As a backdrop to his report card, Phillips stated that the recent 3.5 per cent spurt of expansion in the Amercan economy was “good news” for his country and indeed for the global economy.
But he was quick to press the pause button on the otherwise upbeat assessment to tell the luncheon guests that the global environment which affects the Caribbean, especially Jamaica, was “fraught” with potholes.
“The global environment generally is fraught with risks. Europe is flat. China has slowed down and we are still facing considerable risks, especially in the small island developing states,” he said.
Interestingly, Philips was careful to restrict his assessments to his birthplace’s condition, thus avoiding any references to what was going on in Barbados and elsewhere in CARICOM. As he saw it, the “central problem that has impeded growth in Jamaica over many years” was its track record of “low growth, low productivity” that simply wasn’t sustainable.
Another factor was the high-debt burden which amounted to more than 140 per cent of gross domestic product that must be serviced and was “consuming somewhere in the order of 60 per cent” of the country’s revenue. Add public sector wages and salaries to the debt equation and what’s left after paying the bills was far too little with which to do anything else.
As if that wasn’t bad enough, the fiscal condition had sapped “investor confidence” and affected the ability of investors to settle accounts. There was more. He said the situation had also reduced the country’s access to international capital markets “except at high interest rates”, not only for governments but also for domestic and foreign investors.
“The reality is that over 40 years from 1972 to the present the average rates of economic growth in Jamaica have been less than one per cent and over the same period the debt has increased by 600 per cent,” Phillips pointed out. “That’s the situation, in a nutshell that we confronted in 2012 but which was exacerbated by the ‘Great Recession’ of 2008.’
The key question then is: what has happened to Jamaica’s finances since the nation turned to the Fund a few years ago? Quite a lot.
But first, he explained, Jamaica had started to implement an austerity plan before it had signed on the IMF’s dotted line. The combined initiative called for substantial debt reduction; wage restraint; a competitive currency exchange rate as determined by the market; tax reform and other public sector actions designed to fashion a more positive fiscal environment.
“No doubt it has been a difficult task for the population,” Dr. Philips acknowledged.
Now for the good news. “We have seen beneficial results,” Phillips asserted.
For example, the minister indicated that: Economic “growth has returned.” And it wasn’t’ a one shot experience but four quarters of economic expansion “and each quarter has been stronger than the previous one.” Tourism has been growing, despite the disappearance of discounts on hotel rooms. Agriculture was on a growth path, reaching 15 per cent.
“We have met all of our obligations as far as the IMF programme” was concerned, so much so that the last quarterly review, the IMF didn’t even convene a “formal board meeting” to evaluate the economic report.
Interest rates “are trending down.”
Jamaica was able to return to international capital markets, securing an US$ 800 million loan on the international capital markets “at the lowest interest rate ever in the history of the country.”
Unemployment has fallen “three per cent year on year.” Youth joblessness has also declined, plummeting by five per cent. International reserves have skyrocketed to US$2.1 billion.
Fiscal deficit has also declined. Inflation was “under control.”
Although Phillips didn’t mention Barbados by name, the problems that led Jamaica to the IMF’s door and some of the corrective steps it is taking to reverse its poor fortunes are familiar to most Barbadians.
