Austerity Gamble – Zacca Cautions Against Risks Of Overperformance On IMF Programme
CHRISTOPHER ZACCA, president of the Private Sector Organisation of Jamaica (PSOJ), said yesterday that the country could pay a high price for overperformance under the extended fund facility (EFF) with the International Monetary Fund (IMF).
Finance Minister Dr Peter Phillips yesterday told an economic reform programme stakeholders’ conference in downtown Kingston that Jamaica has so far been overperforming on fiscal and monetary conditionalities agreed with the IMF.
But while conceding this may be good, Zacca cautioned, “Let’s not get too excited about overperforming.
“We are in an agreement and a conditionality that is one of the most onerous that has ever been undertaken by any country. Our primary surplus target is the highest of any non-oil-producing country that is attempting to be sustained over a number of years,” Zacca said.
Jamaica has committed to running a 7.5 per cent primary surplus under the IMF programme.
The PSOJ president, who commended Phillips for his stewardship as finance minister and for what he said has been his consultative approach towards tax reform, said his observation should be interpreted as a note of caution.
“It is not a criticism at this point, but overperformance, meaning we are overtaxing and underspending, which could be just as detrimental as not performing,” Zacca said.
Jamaica passed the first quarterly test under the IMF programme and Phillips said the country was on track to pass the second test, which is due at the end of this month.
“Due regard and congratulations should be given to the public officials who have run a very tight ship over that period and who are on track for a similar performance for the second quarter,” Phillips said.
He said fiscal consolidation was critical under the programme, especially with Jamaica having reached the point where it could borrow no more.
In the meantime, Richard Byles, president of the Economic Programme Oversight Committee, said a major challenge facing the IMF programme was to convince more people that the pain was worth it.
“I think if you did a survey on how Jamaicans perceive the economic reform programme, most responders would describe it as tough, impossible, wicked, can’t help me. The word ‘opportunity’ would not occur in those remarks,” Byles said.
Prime Minister Portia Simpson Miller told the conference that notwithstanding the harsh measures that are being implemented in the programme, her government was committed to staying the course.
“Even as we accept that there is no easy alternative to the adjustment measures, we must be aware of the impact, not only on the very poor, but equally on those on fixed income who have had to make tough choices between competing demands as costs increase whilst income remains frozen,” the prime minister said.
She added: “It is imperative that we do not simply emphasise the need for tough adjustment measures, but we also put in place specific measures that will lead to increased economic activity and, equally important, increased employment opportunities.”
Simpson Miller appealed to stakeholders to join hands with the Government and to provide “hope for those who understand only too well the costs of adjustments”.