THE THRONE Speech, marking the start of a new parliamentary year, opted for a visionary perspective, unlike the more pointed specifics of the Minister of Finance last week.
Finance Minister Omar Davies, addressing the business sector in Montego Bay, predicted that the 2004-5 fiscal year, which starts today, will be the best for the economy. According to the Minister this is likely to be so given the improved investment climate, as "never in our history in terms of firm commitments for tourism are we going to have such a boom."
Spelling out some of the reasons for his optimism, he detailed the healthy Net International Reserves that now stand at US$1.5 billion, and growth in tourism last year. There can be no denying the positive psychological benefit that results from 'talking up' success. Additionally, the Minister's comments could be interpreted as another positive sign that the budget now before Parliament will be relatively painless in terms of new taxes. Nonetheless, there are still some warning signs on the economy that could detract from the optimistic forecast.
First, there is uncertainty concerning the timing of the International Monetary Fund (IMF) monitoring/endorsement of the economy to which the Prime Minister referred in his recent address to the nation. An IMF imprimatur is important for any return to overseas financial markets; but a new monitoring agreement with the IMF is not likely until sometime after the budget is read. This means that the Government may have to resort to borrowing in the local market for some time, thus stalling the downward trend in interest rates.
A second point of caution is that there is usually a lag time before the benefits of big investment projects in alumina and tourism are felt. This is so as big investment projects are usually associated with project cycles. Over time the multiplied positive impact of new investments cannot be denied, but these will not be immediate.
A third area of concern with the Minister's positive outlook relates to the problems in the social agenda such as crime, under-capitalisation of the fire service, and late salary payment in the social sector as occurred recently with prison warders. These problems can thwart any economic gains. Further, there is the problem of increased international oil prices that could threaten inflation targets.
The above imponderables will surely be addressed as Parliament begins study of the new Estimates of Expenditure leading up to the budget debate in the coming weeks.
THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY REFLECT THE VIEWS OF THE GLEANER.
