Don't let Christmas spending bust the budget... or the IMF pact
AT this time of the year, most commercial entities are gearing up to rake in money they might not have made earlier because of the tight space in which the Jamaican economy is operating. This has been the traditional habit and practice, supported by a frenzy of promotional activities meant to stimulate sales.
Furthermore, governments have tended to up their spending, especially on Christmas work, because of the obvious appeal to voters who might have been without a job for most of the year. This spend usually puts a lot more money in circulation, the idea being that it will make for a merrier Christmas.
However, we wish to sound a note of warning that as a nation we should be careful not to throw caution to the wind and spend as if there were no tomorrows. This applies both to individuals and government.
These truly are the worst of times in the sense that our economy has either not grown or has grown so insignificantly over the years that we could be forgiven if we described it as malnourished. In the absence of growth, we have resorted to wanton borrowing to the point that our debt is now almost 140 per cent of gross domestic product.
Indeed, reports that government revenue from Pay-As-You-Earn (PAYE) collections is down by $5.5 billion dramatically tells the unfortunate story. We are feeling the pinch.
Yet at the same time, these are also the best of times. Perhaps for the first time since Independence, we are strictly following an economic programme that is curbing our appetite for debt and reining in out-of-control government spending. This will give us a real chance of stabilising our economy and making it possible to embark on a growth programme.
Regrettably, we were unable to embark on this path of austerity voluntarily and have been forced into it by the necessity to secure an Extended Fund Facility agreement with the International Monetary Fund (IMF). But we are now seeing some light at the end of the tunnel and it is not the oncoming train.
So far, we have been meeting the IMF-stipulated criteria, some of which are bearing fruit. For example, the government-sanctioned Economic Programme Oversight Committee (EPOC) led by Mr Richard Byles, has informed the country that the primary balance of $43 billion, which has been revised to $49.6 billion, still exceeds the IMF target of $38.2 billion. In October, the primary balance of $40 billion was $16.2 billion better than last year at the same time.
In addition, overall tax revenues are up $17 billion over last year; the fiscal balance this year is minus $22.5 billion better than last year's and interest on tax has declined because of lower debt.
Jamaica's second IMF review by the board of the Fund is set for December 18, 2013. There is much confidence that we will again "pass" this test, given that last month the IMF mission had indicated that all quantitative and indicative targets for the end of September were met. A nod from the IMF will make it possible for Jamaica to drawdown on a US$30-million tranche that is critically needed for balance of payments support.
We must continue to ensure that it is not 'chicken merry' this Christmas, while 'hawk deh near' comes January.