Gov't macro economic policies bearing fruit - Davies

Davies

MINISTER OF Finance and Planning, Dr. Omar Davies declared on a national broadcast earlier this week that the Government's macro economic policy over the past six years has started to pay dividends.

He further assured local and overseas investors that the policies which brought about the current stability in the economy would continue.

In the broadcast Dr. Davies drew attention to recent developments in the economy that had generated increased investor confidence.

These include the four per cent economic growth for the first three months of this calendar year as well as the resurgence of the stock market.

He observed that various analysts had identified a combination of factors which have contributed to the revival of the stock market, including a stable exchange rate facilitated by an "unprecedented" level of reserves now close to US$1.6 billion, the equivalent of 28 weeks of imports, and low inflation with single digit figures recorded for the last five years.

Additionally, declining interest rates, buoyant revenue flows and the phased reduction of the double taxation on dividends, have also been mentioned as contributory factors to the stock market upsurge.

Dr. Davies said, however, that what these analysts failed to acknowledge was that these improvements did not come about by chance. "They are the result of a systematic, co-ordinated plan of action, which this administration has implemented over the past several years," the Minister emphasised.

Acknowledging that there had been hardships associated with the tight policy implemented by the Government, Dr. Davies noted, however, that the benefits of the policy had been significant.

"One benefit of reduced inflation is that whatever savings you have, retain value as opposed to having its purchasing power rapidly eroded by high inflation. This is of particular importance to pensioners and fixed income workers. Also, the increased calm and stability in the labour market, which we have seen in recent years, is a direct result of lower inflation," he said.

Another positive, said Dr. Davies, was that as external creditors gained confidence in the policies of the government, the country benefited from improved ratings and there was a greater willingness to "lend us money at lower interest rates".

"This is not a theoretical position, as the positive assessments which we have received from the International Monetary Fund, the World Bank, the Inter-American Development Bank, Standard and Poors, Moodys and more recently JP Morgan, have led creditors to offer to lend us more than we have requested at lower interest rates," he added.

Minister Davies said he recently returned from an official visit to Japan where he met with financial houses who were anxious to begin a relationship with Jamaica based on the improved level of confidence in the economy.

He noted that close to US$700 million had been pumped into Jamaica by private foreign investors in recent times, adding that these investors had recognised the benefits of the increasingly stable macro-economic climate and "have put their money where their mouths are".

The Minister pointed to investments in Ritz Carlton, the Riu Hotel in Negril, in Island Life, Guardian Life, Digicel, Jamaica Public Service Company and "pretty soon in Centennial, Life of Jamaica and National Commercial Bank."

Commenting on the improvement in revenue flows, Dr. Davies said that tax revenues for the first two months of this fiscal year increased by 24.3 per cent compared with the flows over the similar period last year. "You should recall that this was without any new taxes. On the contrary, we raised the tax-free threshold and reduced the tax on dividends to 10 per cent," he said.

The Minister pointed out that the government would utilise the improved revenue inflows to invest in physical infrastructure, human resource development, employment creation and to reduce the stock of debt.

On the question of employment creation, Dr. Davies noted that an expanding economy would logically result in more jobs, particularly for those who had attained certain levels of education and training. "For such groups, our plea is to be patient as new jobs in the Information Technology (IT) sector, in tourism and in the recovering financial sector will provide employment opportunities," he said.

Dr. Davies said the government was cognisant that some people did not posses the requisite education and skills, and had designed programme such as the Social Investment Fund, the Social and Economic Support Programme, and 'Lift Up' Jamaica to respond simultaneously to the infrastructural needs of communities and to provide jobs for the unskilled.

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