FOR decades it has been said that Jamaica’s public sector is in need of a radical overhaul but that now seems to be the case according to Sagicor boss Richard Byles, who also serves as the co-chairman of the Economic Programme Oversight Committee (EPOC). This a body formed to see to it that the government adheres to the conditionalities laid out by the IMF in its Extended Fund Facility (EFF) arrangement with the government.

Speaking as the special guest of the Middle Managers Conference 2014 Media Launch held at the Knutsford Court Hotel on Monday, Byles pointed to a number of positive indicators in the public sector to support his observation.

During his presentation he made note of the passing in the Lower House on Tuesday, March 18 of fiscal rule legislation that now sees a cap being placed on what the country can now spend.

The government has already taken measures that will see the introduction of amendments to the GCT Act to eliminate the zero rate for government purchases. There will be reform of property taxes from the start of fiscal year 2015/16.

Moves have been made that will see the implementation of an action plan on tax administration which should result in the desired modernisation of tax

and customs administration, strengthen the Large Taxpayers Office and make enforcement more efficient.

Discretionary waivers, for so long an impediment to revenue collection, are now a thing of the past, with all waivers being removed from ministerial discretion.

Byles also drew attention to the Omnibus Banking Bill, which has been laid before the House. The aim here is to harmonise deposit-taking legislation into one law, make the Bank of Jamaica the head of the supervisory framework and implement a new structure for holding companies of some of the country’s leading financial companies (which have parent companies overseas).

Byles said this bill would give the Bank of Jamaica wider powers to oversee the entire financial system. The IMF has repeatedly stressed that large holdings of government paper by highly interconnected financial sector players make them vulnerable. The Omnibus Banking Bill should eradicate the threat of Ponzi schemes like Olint and Cash Plus.

Turning to the quantitative side, Byles said that the IMF has made it clear that a 7.5 per cent Primary Balance is to be achieved and a Current Account Deficit of five per cent of GDP. Also a competitive exchange rate must prevail.

Employing government data, Byles said that things bode well for the public sector and the government in meeting the stipulated targets.

For the period April to January in Financial Year 2012-13, the Primary Balance was $47.8 billion. For the same period in Financial Year 2013-14, the Primary Balance moved to $67.5 billion, thereby registering a 41.2 per cent increase.

As for the fiscal deficit, for the period April to January in Financial Year 2012-13, it came in at $43 billion whereas for the same period in the following year it registered at $22.9 billion, spelling a 46.7 per cent improvement.

The Current Account in September 2012 was -US$611 million and for the same period in the following year was -US$409 million, a 33 per cent increase year over year.

The target is to achieve a surplus of 7.5 per cent of GDP and use it to pay down the debt. Byles has said it will take Jamaica 13 years to get the debt in line with what is considered prudent.

The EPOC co-chairman is reported to have said: “If Jamaica can pass all four IMF tests in our first year, that will have a good impact on business morale and on the international financial community. It’s like climbing a steep hill in the first year and then it plateaus off a bit so it is not like all the taxes will go away, but there shouldn’t be any new ones.

“We should be able to carry through the programme thereafter. In the first year all the tough stuff is there and we’re hoping that it will really build some confidence.”

According to Byles then, so far so good, and there is more good news to come. He noted that the government is pushing ahead with public sector pension reform and will be looking to institute a contributory scheme.

The government has not wavered from its commitment to streamline the public sector at a cost of 9 per cent of GDP. It will hold public sector workers to wage agreements as well as conduct a review of labour legislation including separation costs.

In conclusion, Byles said: “So what are the conditions that allowed this move to transform the public sector in such a short time frame?

“The commitment of our political leaders to the IMF agreement has been steadfast. The government has no reasonable alternative and is motivated to succeed.

It is working to a technically detailed sound plan with quantifiable targets and benchmarks to be achieved. The government performance in meeting prescribed targets is measured regularly and reported. So the lesson to be learned here is if you want change in the public sector, put it in the IMF Agreement!”