Post-EPOC clarity required
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.
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.