Basil Wilson
For
Carib News
11/5/14
Dr. Peter Phillips, the Minister of Finance, was the keynote speaker at Caribbean International Network’s annual lecture held at the Schomburg Library in Harlem, New York. Phillips was given responsibility for the Ministry of Finance immediately after the People’s National Party won the December, 2011 election.
Peter Phillips once aspired to be the leader of the People’s National Party and was defeated twice by Prime Minister Portia Simpson Miller. Despite the loss, he is considered one of the more effective ministers in the previous cabinet of Prime Minister P.J. Patterson and the extant Prime Minister Portia Simpson Miller.
The recent Bill Johnson poll published in the Gleaner revealed that the PNP has lost ground to the JLP and the leader of the JLP, Andrew Holness has better favorability ratings than Portia Simpson Miller. This fall from grace can be attributed to the economic woes that the Jamaican people are experiencing as a result of the agreement with the International Monetary Fund.
The Minister of Finance delivered a detailed presentation on the Jamaican economy. Essentially for the last four decades, the Jamaican people have been living in a fool’s paradise. Elected officials of both Parties kept the illusion afloat even though economic growth was stunted and borrowing to close chronic deficits meant the day of judgment was not too distant.
Dr. Peter Phillips enlightened his attentive audience that for the last four
decades the Jamaican economy had registered a meager .5 percent GDP growth rate yet borrowing increased by an average of 15 percent on an annual basis. That was a formula for a shipwreck. After 2008, the Jamaican government found that capital markets had become inaccessible and there was simply no alternative but to return to the I.M.F, cap in hand, to keep the sinking ship of state afloat.
Dr. Peter Phillips now has the onerous task to plug the holes and make the ship of state seaworthy once again. But that is a protracted process and voters are by nature impatient and expect apocalyptic results. Phillips mentioned the necessary sacrifices and belt-tightening that are required to extricate the Jamaican economy from the debt trap. The Jamaican currency has been devalued and presently is worth $112 (JA) to $1 (US).
The logic of devaluation is to make Jamaican exports more competitive in the global market and it also makes imports more expensive. Also, the outgrowth of devaluation is the lowering of middle class and poor people’s living standards.
Further exacerbating living conditions are the increase in taxes necessary to end deficit spending and the need to create a primary surplus that is used to pay down the staggering public debt that reached an astronomical 143 percent of Gross Domestic Product. The Minister offered the revelation that based on the policy of fiscal restraint the accumulated debt had inched down to 139 percent of GDP.
The reckless borrowing of the last four decades has meant that every fiscal year, a huge chunk of the budget has to be used to pay back the accumulated debt. This means that rather than increasing funds for education, infrastructure, health, etc., the repayment of debt became an albatross around the necks of the Jamaican people, forcing high interest rates and stifling economic growth.
The present PNP government has been able to satisfy the conditions of the IMF agreement. Despite the heavy load on the Jamaican people, the Minister of Finance reported some hopeful signs. The foreign reserves that were precariously low have increased to over $2 billion dollars. The trade deficit has been reduced. There is hope for economic growth as Jamaica has improved its standing in the world ranking to attract foreign investment.
The trump card for growth pivots around Jamaica taking advantage of its geographical position in lieu of the Panama Canal expansion and becoming a logistical hub for world shipping moving between North America and South America. The Chinese has plans for Goat Island and the upgrading of Kingston Harbour. The expectation is that these investments will have a multiplier effect on the Jamaican economy. There is some concern that the Chinese will bring in their nationals and Jamaican workers will not benefit fully from the enhanced economic activity.
The new macro-economic reality will create new opportunities for Jamaican entrepreneurs. The Minister mentioned the establishment of agro-parks to expand food production. There are two critical factors that will determine future economic growth (1) the reduction of the cost of energy and (2) a greater emphasis on exports. In an age of globalization, the entrepreneurial class would be remiss if they focused solely on the domestic market. The key to jump starting the Jamaican economy is to boost exports in partnership with companies engaged in advance production.
There are plans to reduce energy cost but the future is not with coal or LNG but with solar energy and wind energy. This is where partnerships with companies of a cutting edge technology will have a complimentary impact on Jamaica’s economic future.
Dr. Peter Phillips is very much aware that Jamaica has to stay the course of fiscal discipline despite the political fallout. What is further needed from the Minister of Finance and Planning is clarity on the concrete measures necessary to ensure growth.
Jamaica is an island but its survival depends heavily on understanding globalization and the vital necessity of the export market. The diaspora can assist in that endeavor although based on the level of questions directed at the Minister during the Q and A, some members of the diaspora appears marooned on the high seas.
HHo
