How to avoid being tricked in the election campaign

Thursday, October 27, 2011

All indications are pointing to a general election before the end of this year. A plausible scenario is that Prime Minister Andrew Holness is elected leader of the Jamaica Labour Party (JLP) at its annual conference in November and uses the occasion to announce the holding of a general election.

Between now and then, both political parties will be in election mode and therefore every pronouncement by the respective party leaders and the leading spokespersons must be carefully evaluated by the public. Public scrutiny is necessary to differentiate between what is a realistic and pragmatic statement of policy and what is merely being said to gain political advantage.

The economic policy options for Jamaica after the election are very narrow and the broad template of economic reform and macroeconomic management have already been put into operation. The future economic policy of any post-election government will essentially be a continuation of the economic policy of the last few years.

The tenets of future economic policy are known and any statement disavowing or reversing them or describing them as unnecessary or avoidable is a political statement.

Total tax revenue has to be increased by completing the 10-year long discussion on tax reform. The outcome of tax reform must balance spreading the tax net without burdening the poor. More attention must be given to reducing tax avoidance and tax evasion which is rampant in the business community. Tax reform must be complemented by a drastic rationalisation of the public sector including a downsizing of the number of ministries. It is inevitable that there will be some loss of public sector jobs but this can be done humanely by not filling the posts vacated by retiring civil servants. Any pronouncement to the contrary is indeed to deceive the public for political gain.

Jamaica has reached the limit of borrowing and the amount of government revenue devoted to serving debt must be reduced. Jamaica must wean itself from its addiction to borrowing if it is ever to have a public sector that can support growth through fiscal expenditure on capital investment.

Borrowing from less expensive sources is a wise strategy but all debt has to be repaid at some stage. Borrowing in foreign exchange must be tied to an identifiable direct stream of foreign exchange revenue which can cover amortisation. Any statements suggesting the ability to continue borrowing at the rate of the last ten years is simply disingenuous.

Jamaica will have to continue with a programme with the International Monetary Fund (IMF), whether it is a continuation of the existing programme or a recalibrated programme or a new programme. This could be either a Standby arrangement or an Extended Fund facility. Regardless of whether it is called negotiation or re-negotiations, nobody should try to deny this because the adherence to an IMF programme is the trigger for money from the World Bank, Inter-American Development Bank, the European Union and bilateral donor agencies.

The JLP and the People's National Party must tell the Jamaican people that the adjustment of the economy will take a few more years and it will not be easy.

There is no need to be pessimistic because the macroeconomic fundamentals are the best they've been in the last 30 years; there has been some economic growth and the outlook for sugar, tourism and bauxite are encouraging.

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How to avoid being tricked in the election campaign