Don’t look to IMF to grow lo­cal econ­omy, Bul­lock warns

Jamaica Gleaner - - SOCIAL SOMETHING EXTRA - Jo­van.john­son@glean­erjm.com Ro­mario Scott Gleaner Writer ro­mario.scott@glean­erjm.com

mov­ing the an­nual in­fla­tion rate for the 12-month pe­riod at Septem­ber to 1.9 per cent, 0.1 per cent more than the 1.8 per cent Au­gust fig­ure.

Dr Wayne Henry, the director gen­eral of the Plan­ning In­sti­tute of Ja­maica, who was ap­pear­ing be­fore the com­mit­tee, said so­cial pro­tec­tion had been built into the cur­rent deal with the In­ter­na­tional Mon­e­tary Fund and would con­tinue with the suc­ces­sor pro­gramme to be con­sid­ered for ap­proval next month.

“A key fea­ture is that con­tin­ued com­mit­ment to specif­i­cally en­hance the so­cial-pro­tec­tion sys­tem – specif­i­cally in broad­en­ing the cov­er­age to the low­est con­sump­tion quin­tile. There are some spe­cific mea­sures there that I wouldn’t speak out of turn [on], but I know it’s to be dis­cussed.”

Henry, not­ing that Ja­maica has re­ceived tech­ni­cal as­sis­tance from mul­ti­lat­eral part­ners, said there has been a re­view of the so­cial-pro­tec­tion pro­grammes to grad­u­ate peo­ple.

“So­cial pro­tec­tion, at the end of the day, shouldn’t be a per­pet­ual hand­out, but the hope is to em­power per­sons that they won’t need in fu­ture such mech­a­nisms,” he told the PAAC meet­ing.

In the mean­time, Fi­nan­cial Sec­re­tary Ever­ton McFar­lane said the Govern­ment can­not “com­pen­sate away all of the im­pact” of the shift to­wards in­di­rect taxes by in­creas­ing ben­e­fits un­der so­cial pro­grammes such as the Pro­gramme of Ad­vance­ment Through Health and Ed­u­ca­tion.

MIT­I­GAT­ING RISKS

“What you can also try to do is to spend some money to ac­tu­ally give them an op­por­tu­nity to earn bet­ter liveli­hoods to mit­i­gate the risks,” he said. “I wouldn’t sit here and deny that it has the po­ten­tial to be re­gres­sive, and, in fact, if we’re not care­ful, it will be ex­tremely re­gres­sive.”

Con­tin­u­ing, he said: “But it’s re­ally a trade-off. The cur­rent per­sonal in­come tax sys­tem is also highly re­gres­sive in the sense that it is the PAYE per­sons who pay the vast ma­jor­ity of the per­sonal in­come tax, and that’s a sig­nif­i­cant share of your di­rect taxes. In a cer­tain sense, when you’re shift­ing to in­di­rect taxes, it kind of al­lows the bur­den to be shared more broadly across so­ci­ety, but it also im­proves the prospects for greater ef­fi­ciency be­cause your in­di­rect taxes are eas­ier to po­lice.” FORMER DIRECTOR Gen­eral of the Plan­ning In­sti­tute of the Ja­maica (PIOJ) Collin Bul­lock has warned that nei­ther the Govern­ment nor the coun­try should be look­ing to the In­ter­na­tional Mon­e­tary Fund (IMF) as the de­signer of the coun­try’s fun­da­men­tal growth pro­gramme.

He says it would be an ab­di­ca­tion of na­tional re­spon­si­bil­ity if there was any be­lief or thought that the IMF would take on such a role in na­tional af­fairs.

“The IMF is not a de­vel­op­ment bank. It has no sem­i­nal man­date in fa­cil­i­tat­ing eco­nomic growth, and nei­ther the IMF nor any of the mul­ti­lat­eral or bi­lat­eral part­ners can be given re­spon­si­bil­ity for ei­ther de­sign­ing or im­ple­ment­ing growth or de­vel­op­ment pro­grammes for Ja­maica,” he said.

Bul­lock, who was speak­ing at a re­cent sym­po­sium hosted by the Depart­ment of Eco­nom­ics at the Univer­sity of the West Indies, Mona cam­pus, noted that the Govern­ment was on a mis­sion to or­ches­trate and fuel a growth agenda.

IMF STA­BIL­I­SA­TION POL­ICY

He said, how­ever, that the essence of the IMF sta­bil­i­sa­tion pol­icy un­der­mines growth po­ten­tial in the coun­try, which is an as­pect of the cur­rent ex­tended fund fa­cil­ity pro­gramme that is yet to be ex­plored in a com­pre­hen­sive man­ner.

He fur­ther pointed to the dol­lar­i­sa­tion of the Ja­maican econ­omy as an is­sue that has arisen out of the IMF pro­gramme, which is pro­hibit­ing growth. He says the play­ers in the fi­nan­cial sec­tor have ex­ploited the de­val­u­a­tion of the Ja­maican dol­lar, hence in­creas­ingly dol­lar­is­ing the Ja­maican econ­omy.

“You have am­bi­tious re­serve ac­cu­mu­la­tion tar­gets and you have an un­der­funded IMF pro­gramme. That is a recipe for a one-way move­ment of the ex­change rate,” he ar­gued.

The former PIOJ head said the dis­cus­sion sur­round­ing the sup­ply and de­mand of the Ja­maican cur­rency in the broader con­text of the IMF pro­gramme has been ab­sent.

As for the new pre­cau­tion­ary standby agree­ment the Govern­ment is try­ing to ink with the Fund, Bul­lock is of the opin­ion that Ja­maica should have con­tin­ued a bor­row­ing re­la­tion­ship with the IMF.

He has ques­tioned how forth­com­ing other in­sti­tu­tions will be in lend­ing to Ja­maica in the case where the IMF is not be­ing asked to put money up­front to lend to Ja­maica.

“The is­sue with the in­sti­tu­tions in Wash­ing­ton, United States, is who is putting more. The In­ter-Amer­i­can De­vel­op­ment Bank would be ask­ing, for ex­am­ple, ‘Are we fi­nanc­ing Ja­maica? Pay­ing back the World Bank?’, and vice versa,” he rea­soned.

In the mean­time, Bul­lock said that Ja­maica is still a long way off from debt sus­tain­abil­ity, not­ing that the debt-to-GDP ra­tio is nowhere close to 95 per cent, which the coun­try should achieve by 2020, or 60 per cent by 2025.

He said that af­ter the cur­rent ex­tended fund fa­cil­ity ends, is­sues such as pen­sion re­form, pub­lic-sec­tor re­form, and rev­enue cer­tainty in the face of per­sonal in­come tax re­form and phase two of the im­ple­men­ta­tion of the Govern­ment’s $1.5 mil­lion tax-re­lief pol­icy will be the chal­lenges star­ing the Hol­ness-led ad­min­is­tra­tion in the face.

BUL­LOCK

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