For the past three decades, Jamaica has had little to show from its economic policies: Annual rates of growth have averaged less than one per cent, public debt is among the highest in the world, and serious social challenges in the form of high crime rates, poverty, and unemployment are present. While this is not a pretty picture, it is not drawn in permanent ink.

We want to see Jamaica break the vicious cycle of chronically low growth and eroding international competitiveness. To break the cycle, Jamaica needs to implement and sustain a credible reform programme. That is what the IMF is working towards with the Jamaican authorities. Economic reform will need the support of the Jamaican people to be effective and lasting, and while these reforms cannot all be done at once, they are necessary and urgent.

The Jamaican people must also understand that not everyone can benefit exactly at the same time while these critical reforms are underway. While there must be fair burden-sharing across society, the IMF is working actively with the Government to protect the poorest and most vulnerable in Jamaica, for example, by requiring a floor on social spending, and ensuring capital expenditure reflects national priorities.

With the IMF’s support, Jamaica’s economic programme will grapple with the short-term vulnerabilities of falling international reserves and limited access to finance. But even more importantly, it will start to address deep-rooted structural impediments to sustained and stronger growth — for example, through creating a tax system that is fair and predictable, with lower rates and fewer discretionary exemptions, and fostering a business environment that instils confidence and promotes investment and employment.

It is also important for the Government to establish a credible track record of economic policy implementation to restore confidence more broadly in its policies. The IMF understands that for the authorities to build support and sustain reform there must be effective communication and dialogue at all levels of society. With this in mind, let me elaborate on what we see as a starting point for the reform process.

A good first step is to focus on the principle that the income earned by a country over time should be at least equal to its expected expenditure over the same period of time. If national expenditures exceed national income, the rest of the world has to finance this deficit. As this situation persists (as it has in Jamaica), net indebtedness to the rest of the world grows. At end-2011, Jamaica’s net indebtedness had grown to about 135 per cent of GDP, well beyond levels that are internationally deemed prudent. To reverse this, the country needs to produce/export more or import less, reducing the need for financing from the rest of the world.

Another way of saying this is that the Government and the private sector need to strengthen their revenue-expense balances and reduce their accumulation of debt. Some of that debt is owed to local residents, some to overseas residents. For the Government, the bottom-line is fiscal sustainability, reflected in the goal of reducing its debt-to-GDP ratio to about 95 per cent of GDP by 2020.

To achieve this, a primary surplus (the excess of revenue over expenses other than interest on government debt) of 7.5 per cent of GDP is a requirement. However, because this goal can be achieved through different policy choices, the Government has the responsibility of choosing its preferred combination of parameters to meet this target. Similarly, there are various revenue and expenditure combinations that could be used to achieve a primary surplus of 7.5 per cent, and that choice also rests with the Government, in active consultation with the IMF.

For the private sector, the heart of the matter is international competitiveness — the ability to produce quality products at a competitive price, thereby generating opportunities for growth and employment. Essentially, that means improving product quality, enhancing productivity, or reducing the cost of production.

The Government is committed to implementing a four-year economic programme through 2017 that seeks to avert immediate crisis risks and create conditions for sustained growth. The main pillars of the programme are: (i) upfront fiscal adjustment, supported by extensive fiscal reforms; (ii) debt reduction, for which the National Debt Exchange (NDX) is a start to placing public debt on a sustainable path (iii) structural reforms to boost growth; (iv) actions to improve competitiveness; and (v) improved social protection programmes to help the most vulnerable and promote more equity.

Actions include, in the fiscal sector, strengthening procedures and execution of the Government budget, enhancing cash management, and improving rules-based decision-making and compliance mechanisms, along with reforms in tax policy and administration; in the financial sector, strengthening oversight and improving regulation; and for growth and social policy, implementing measures to improve the business climate, lower the cost of energy, reduce crime, and enhance programmes like PATH. The strategy also seeks to implement policy safeguards to lock in gains achieved and reduce business uncertainty.

So what else lies ahead? A real challenge ahead is the implementation of the programme. Achieving the agreed budget surplus target and reducing the government debt will require strong fiscal discipline. On the revenue side, reforms that broaden the tax base, reduce rates, and enhance tax administration are essential. On the expenditure side, wage restraint, public sector pension reform, and public sector and social expenditure rationalisation, as well as the savings from the NDX, will all contribute to stronger fiscal management. However, it is vital that the temporary benefits from wage restraint and the debt reduction be locked into more permanent and lasting economic benefits through the implementation of structural reforms.

Importantly, achieving the 95 per cent debt-to-GDP ratio in 2020 is only a stepping stone. This level of debt would still be too high and should be reduced further to ensure Jamaica has the ability to cope with adverse shocks — from natural disasters to increases in the price of oil.

We know the structural reform agenda will take time. Jamaica also has to stay the course, taking one step at a time, and locking in gains achieved at each step. Generating efficiency in public sector services will have lasting benefits; so will efficiency gains from reduced bureaucracy and red tape. Over time this transformation will reposition Jamaica’s resources, including its labour force, toward serving as stronger and more efficient growth engines.

But getting the economic environment right is only one side of the coin. The private sector, from the individual entrepreneur to the mid-size firm to the largest corporations, will need to embrace challenges, take risks, and respond positively to positive changes in the business environment.

After three decades, now is the time to paint a better picture of lasting growth and of opportunities that all Jamaicans deserve.

— Gene Leon is the IMF’s senior resident representative in Jamaica