Single source of economic policy statements essential

Sunday, January 08, 2012

A familiar scenario after a general election is that there is a period of uncertainty about the economic policy that the new political directorate will pursue.

We suggest that it is absolutely essential at this time that there be only one source of policy statements on economic issues and economic policy. These statements must come from the minister of finance and only the minister of finance. If not, we risk confusion, which can lead to uncertainty and even panic in markets.

We notice, for example, that there were many worried calls to the talk shows about whether there would be a return of high interest rates, forcing the former finance minister to clarify statements he had made to assure the nation that the new Government was interested in maintaining low interest rates.

Of course, this happened in a situation where the minister of finance had not yet been named and there were questions about whether the architects of that era would be returning. We point this out because such uncertainties can raise doubts among the public, the bond rating agencies and the international financial institutions about the continuity of macroeconomic policy.

The new finance minister must avoid the situation which plagued the Jamaica Labour Party Government when economic policy announcements came from Minister Audley Shaw, then minister of state Don Wehby and Prime Minister Bruce Golding. Local and foreign economic actors were further confused by statements from the governor of the Bank of Jamaica, the director general of the Planning Institute of Jamaica and the financial secretary.

Dr Peter Phillips, the new finance minister, is a very able and experienced public servant and should have a successful tenure in the job. We suggest that he, at the very earliest opportunity, makes a statement outlining the broad direction of the Government's macroeconomic policy and indicate his core technical team.

At this juncture we could not reasonably expect him to provide extensive details of specific goals, set out any schedule for completing the negotiations with the IMF, present a supplementary budget or conclude the long outstanding policy discussions such as tax reform.

We are aware that it will not be possible for ministers to refrain from making public statements about matters in the subject area for which they are responsible, but which have implications for macroeconomic policy. The prime minister and her ministers must be careful to ensure that what they say is not open to interpretation which intimate intra-government divergences. They must desist from saying anything that pre-empts the minister of finance, regardless of the experience they feel that they have had.

Good fence makes good neighbours and develops the respect that makes collective responsibility possible. Anything else could be viewed as an arrogant or churlish disregard for the finance minister and an unwillingness to abide by the ministerial allocation of Prime Minister Portia Simpson Miller.

Until the markets are taking their cue from actual policy there must be clear, consistent economic policy statements from the finance minister. This is essentially because the current economic scenario does not, in our view, afford the new Government any more than six months within which to get the economic policy perspective right.

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Single source of economic policy statements essential