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