THE national budget for the year 2012/13, which is due for presentation at mid-May, is more important than usual.

Not only is the budget of a government the single most important economic policy statement and one of its most influential policy instruments aimed at the macroeconomic and sectoral performance of the economy, but it impacts all aspects of the economy because government's activities represent the largest flow, stimulating expenditure both public and private.

It is also a major determinant of gross investment, and how government finances the budget influences all economic decisions, especially the amount and forms of taxation.

This year it is hoped that the impact of the budget will be to stimulate the nascent economic growth exhibited by the economy in the last two quarters. If the budget can help to keep the growth momentum going it might be the start of a period of sustained economic growth.

If external circumstances are favourable, ie there are no spikes in oil prices and the US economy continues to grow, then economic growth could accelerate.

The International Monetary Fund (IMF) negotiations will be influenced by the character of the budget as a signal that the Government of Jamaica is seriously committed to taking the difficult decisions which are unavoidable. These decisions relate to debt management, tax reform, public sector wages and public sector pensions. The budget will set the parameters within which these issues will be managed.

Financial institutions and investors, both local and international, will be watching the budget to reassure themselves about the debt they currently hold and induce them to continue to purchase Government of Jamaica issues of debt.

The extent to which it is successful will be reflected in the amount of funds that the GOJ is able to raise on the international capital markets and the interest rate on these funds.

The budget is critical to the credibility of Jamaica's economic policy stance since an agreement with the IMF does not appear to be likely until September, which is in keeping with the anticipation of the Government but later than financial markets were expecting. The credibility of the Government rests on the stable macroeconomic fundamentals and Dr Peter Philips' intelligence and political strength.

While the minister of finance has demonstrated his command of his portfolio, his reputation and words will not be enough. What is required are deeds consistent with words because the economic management of the Golding Administration dissipated the enormous goodwill which it was accorded when it came to office.

Observers are anxious to continue to believe that Dr Phillips is holding his political "ground" against a Cabinet and party whose populist inclinations and "wilful ignorance" militate against the type of collective fiscal responsibility which is necessary.

The 2012/13 budget must accomplish much if there is not to be fallout detrimental to the economic future of Jamaica.