AS Jamaicans continue to buckle under the pressure of inflation and rising gas prices, local businessmen are urging the Government to be judicious in how they implement social assistance programmes.

Speaking at a Private Sector Organisation of Jamaica (PSOJ) virtual forum dubbed ‘Roadmap to Jamaica 2.0 Series’, the businessmen cautioned lawmakers against wholesale spending.

The forum, which focused on tracking Jamaica’s macro-economic performance year to date, highlighted that Jamaica is still a very highly indebted nation and must remain fiscally prudent to achieve the targets outlined in the Fiscal Responsibility Law (FRL).

Among the targets set out in the FRL is the goal to reduce the public debt to 60 per cent of GDP by 2027/28. According to the International Monetary Fund (IMF) in order to achieve the debt to GDP target it would require fiscal surpluses of around 2½ per cent in the outer years.

Other targets include achieving a fiscal surplus of 0.3 per cent of GDP for FY2022–24 to FY2024/25 and maintaining a target of nine per cent wage to GDP ratio.

Of note, the budget includes 0.5 per cent of GDP additional spending to continue funding of the CARE social assistance programme and 1½ per cent of GDP in revenues from a one-off supplemental dividend by the Bank of Jamaica (BOJ).

But with multilaterals like the IMF and the World Bank advising governments to loosen their purse strings and spend more on subsidising energy and food, the local business community is suggesting that the Government continue to take a targeted approach to social welfare spending.

Member of the PSOJ Economic Policy Committee, Theodore Mitchell, said, “we do not encourage any significant rise in terms of spending simply to subsidise food, etc. But we do note there are large groups of individuals in the country that are vulnerable. The spending must be targeted to these individuals instead of wholesale spending to mitigate the impact of inflationary pressures on households.”

Mitchell explained that if the Government does not take a targeted approach, other areas which require well-needed funding will be jeopardised.

“Whenever the Government engages in additional spending, we tend to see a cut on the capital side of the budget, while we are seeing infrastructure improvements we wouldn’t want the Government to embark on any willy nilly spending. We have to mindful that we commit sufficient levels to capital spending so as to get the infrastructure to a point where it will induce higher levels of growth,” Mitchell continued.

Most recently, the Government introduced an electricity subsidy for customers who use 200 kilowatt hours (kWh) of electricity or less for the months of April, May, June and July.

At the same time, the Government has come under increased pressure from consumers who are demanding a break from the gas tax.

Dr Adrian Stokes, who is co-chair of the PSOJ Economic Policy Committee, agreed that social assistance programmes must be strengthened in light of the economic circumstance. However, he too believes that government spending must remain targeted towards the poorest Jamaicans.

“Any country must take care of its most vulnerable people and I believe the Government has been doing that through social spending, for example, the subsidy it is providing on electricity bills. But it has to be targeted because the fiscal situation does not support a wider involvement of the Government in the economy, certainly as it relates to subsidising energy and so on,” Stokes stated.

In the meantime, Richard Pandohie, who is also co-chair of the PSOJ Economic Policy Committee, said businesses are already raking in lower revenues as consumer demand wanes.

“Margin compression is real because the kind of price increases that are being faced, it’s very difficult to pass that on to consumers and not get demand destruction. You can price to a point where people just can’t afford to buy the product. We’re seeing that situation now where there’s a slowdown in demand. But, it depends in the case of the services sector there’s a resurgence. “

Pandohie called for a productive sector transformation which he said has been a challenge in Jamaica.

“I think that it [productivity] has to be addressed in a serious way to find our balance to keep our demand sustainable,” he added.