Today, Minister of Finance and the Public Service, Dr the Honourable Nigel Clarke will lead the Jamaican delegation to the 2019 Spring Meetings of Board of Governors of the International Monetary Fund and World Bank in Washington, DC and then attend the Fourth Annual ECOSOC Forum on Financing for Development on the 15 April 2019 at the United Nations Headquarters, in New York.

In Washington, in addition to meetings with the IMF and World Bank, Minister Clarke has been invited to speak on financing for development, as well as on fiscal policy, and disaster resilience, and has also been invited to speak on “Mobilising Finance for Climate Action” at the Fourth Annual ECOSOC Forum on Financing for Development at the United Nations in New York.

We will return to the importance of his trip shortly, but note that improving access to finance and reducing transactions costs, as the way to empower Jamaicans, was of course the main emphasis of Minister Clarke’s budget speeches, which he termed “bubble up” to emphasise its inclusive nature of allowing people to rise through their own efforts as opposed to “trickle down” economics, implying that only the top benefits.

The measures he cited included the rise in the GCT threshold to $10 million, abolition of the minimum business tax, elimination of the asset tax on non-financial businesses, and particularly lowering interest rates on 115,000 NHT mortgages and 10,000 student loans.

The abolishing of most stamp duty and the reduction of transfer tax looks like it was the starting gun for a mortgage war, with one institution advertising less than seven per cent for a mortgage, another announcing 110 per cent financing for PAYE earners and a third announcing 100 per cent financing for non PAYE.

Finally, it seems that even premium luxury vehicles can now be financed at 100 per cent, for 10 years, at a fixed 6.5 per cent rate.

With Jamaica’s short-term policy rate of 1.25 per cent or around half the US Federal Reserve’s of 2.5 per cent, itself unheard of, 10-year Government of Jamaica (GOJ) Jamaican dollar-denominated securities at around 5.2 per cent, and 10-year GOJ US-dollar Eurobonds at around 4.9 per cent, or a difference of only roughly 30 basis points less financing conditions look set to better those of the 1960s, if they have not already done so.

It may be appropriate to inject a note of caution here.

Currently, the local real estate market, particularly residential, seems the main focus for new investment, which despite its technical place in the national accounts should really be regarded as a form of consumption.

The good news is that both equity and debt capital markets are now fully open, so we now finally have a “financial market that funds entrepreneurs”, in the words of IDB consultant Dr Paul Holden, as a result of some of Minister Clarke’s reforms.

Amongst other things, Holden’s nearly 15-year-old study mentioned the reduction of transfer tax and the elimination of stamp duty. However, SMEs in Jamaica still have a problem in accessing credit, although things are finally improving.

Various government groups are analysing the access to credit issue, so it is time that they start reporting their findings to allow greater public consideration of the policy issues involved so the society can chart a way forward to ensure that access to credit becomes truly inclusive.

In addition, the Finance Minister clearly articulated his emphasis on sharply increasing our productive infrastructure, which now needs to go beyond roads and national security.

If the Bank of Jamaica has an inflation target of four to six per cent, and Jamaica can borrow at just over five per cent in Jamaican dollars for 10 years, if you believe the inflation target (we should note we have been recently undershooting it) the Jamaican government can now borrow at real rates of interest of near zero per cent.

As the US economy begins what looks like a sharp slowdown from last year’s tax cut driven “sugar high” of 2.9 per cent GDP growth (or one per cent above Jamaican’s 1.9 per cent GDP growth also for 2018), the Fed’s recent interest rate hikes are likely to be reversed, justifying Bank of Jamaica Governor Brian Wynter’s recent local interest rate cuts, and even making him look somewhat prescient.

In their just-released global economic outlook, the IMF’s new chief economist, Gita Gopinath, again (for the third time in six months) cut their global growth forecast to 3.3 per cent for 2019, the lowest since the financial crisis in 2009, or approximately in line with their also reduced projection of three to four per cent growth of trade in goods and services for 2019.

She correctly described this as a “delicate moment” for the global economy, and added that her second half projected recovery in world growth was “precarious” as the IMF sees global risks as skewed to the downside.

All of this suggests that the minister of finance, with an obvious eye on potential external shocks, was right to take a “risk management” type of approach to financing the last budget, meaning a cautious approach to reducing the very reliable GCT and SCT.

This is of course where we get back to our minister of finance’s trip to Washington and New York.

In such a context, mobilising finance for development and climate action becomes critical. Jamaica needs to find a way, through both local and international public private partnerships, to mobilise a mixture of local and financial capital to invest in projects that will produce positive payoffs over the long term, even in areas that may look less financially attractive at first glance.

These include our sewer system, gullies, basic water supply, hospitals and schools, all of which have suffered from decades of neglect and lack of investment.

Fixing these requires faster economic growth and continued fiscal discipline and financial innovation (for example, to deal with the impact of a big hurricane), a difficult combination.

One of the most important positives is Minister Clarke’s emphasis on institutional capacity building, not only though the creation of an independent fiscal council (to analyse the budget numbers), or an independent central bank, but, most importantly, through upgrading the technical capacity at the Ministry of Finance — areas like statistical analysis via building macroeconomic or debt sustainability models, with help from IMF consultants such as his Chief Fiscal Advisor Calvin McDonald — suggest Jamaica will have the requisite technical competence in place before the IMF leaves.

Mr McDonald will speak on these issues at a Jamaica Chamber of Commerce event at the Knutsford Court Hotel on Thursday morning.

Note : Calvin McDonald is Deputy Secretary and not a deputy managing director of the IMF as reported in the headline of my Sunday Observer article.