Post-EPOC clar­ity re­quired

Jamaica Gleaner - - OPINION & COMMENTARY -

IT’S NEWS worth cel­e­brat­ing. Aud­ley Shaw and oth­ers, how­ever, must be care­ful lest they over­hype the bur­geon­ing, but still del­i­cate, sprouts of eco­nomic growth. For, good green shoots, un­less ap­pro­pri­ately nur­tured, can be eas­ily sti­fled by bad weeds.

In this re­gard, there are sig­nif­i­cant el­e­ments of Ja­maica’s eco­nomic pro­gramme, the re­cent con­ti­nu­ity of which this news­pa­per en­dorses, that still de­mand clar­ity from the Hol­ness ad­min­is­tra­tion, if its aim is to main­tain the con­sen­sus the project has en­joyed for the past five years.

To be clear, we, too, are warmed by the early dis­clo­sure by Mr Shaw, the fi­nance min­is­ter, that the Ja­maican econ­omy grew by 2.3 per cent for the quar­ter be­tween July and Septem­ber. That, with­out con­text, is not riv­et­ing in­for­ma­tion. But Mr Shaw re­ported that it was the high­est growth by Ja­maica for any quar­ter in 14 years. That per­for­mance fol­lows on growth of 1.6 per cent growth be­tween April and June, and the first quar­ter’s 0.6 per cent, when com­pared with the same pe­riod in 2015.

The up­shot is that the coun­try seems on track to record GDP ex­pan­sion of more than two per cent this year and to end the dis­mal cy­cle that has de­liv­ered an­nual av­er­age growth of less than one per cent over four decades. We are not par­tic­u­larly sur­prised by these ini­tial flour­ishes. They rep­re­sent, largely, early re­turns from the macroe­co­nomic sta­bil­ity, bought with half a decade of tough fis­cal con­tain­ment by the Govern­ment, and sup­ported by re­forms to make it eas­ier for the pri­vate sec­tor to do busi­ness.

To its credit, in the eight months it has been in of­fice, An­drew Hol­ness’ ad­min­is­tra­tion has not only con­tin­ued the re­form poli­cies it in­her­ited, but is com­mit­ted to their en­trench­ment – ev­i­denced by its de­ci­sion to en­ter a standby ar­range­ment with the In­ter­na­tional Mon­e­tary Fund (IMF) in ex­change for the near-ex­pired ex­tended fund fa­cil­ity. Herein lies, though, our need for clar­ity.

NEW TAR­GETS

The not-in­con­se­quen­tial part of the rea­son for the suc­cess thus far of the IMF-in­spired project was the mon­i­tor­ing pro­vided by the in­de­pen­dent, Richard Byles-led Eco­nomic Pro­gramme Over­sight Com­mit­tee (EPOC). It pro­vided monthly re­ports on the Govern­ment’s fi­nances and its prospects for meet­ing agreed quar­terly tar­gets. Trans­parency kept the Govern­ment hon­est.

The bench­mark tar­gets for the new pro­gramme will not be pre­cisely the same as the old, and the IMF re­views will be half-yearly, rather than quar­terly. But we be­lieve the man­age­ment of the fis­cal ac­counts to be so crit­i­cal that it re­quires trans­par­ent over­sight sim­i­lar to that pro­vided by EPOC. More­over, this sim­i­larly in­de­pen­dent body should re­port monthly on the ac­counts. In­deed, their work should not pre­clude, if nec­es­sary, a sep­a­rate, but re­lated com­mit­tee, pro­vid­ing, in a sim­i­lar fash­ion, over­sight of, and re­port­ing on, other non-fis­cal bench­marks.

The Govern­ment must ur­gently state its po­si­tion on this mat­ter, giv­ing the pub­lic time to vet nom­i­nees to any such com­mit­tee(s).

Fur­ther, Mr Shaw has sug­gested that “care­less­ness, greed and spec­u­la­tion” are the cause of the slip­page, in re­cent months, of the Ja­maican dol­lar. He says he has es­tab­lished a task force to ad­dress the is­sue. The peo­ple on that task force and their spe­cific terms of ref­er­ence are un­known. In the­ory, the Ja­maican dol­lar is freely traded cur­rency, whose price is to be de­ter­mined by mar­ket forces that thrive on trans­parency.

The cen­tral bank has a tool­box of le­git­i­mate op­tions to counter spec­u­la­tors. It wants to avoid per­cep­tions of rig­ging the rates.

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