THIS YEAR'S 2004 Budget Debate saw the Opposition Spokesman on Finance, Audley Shaw, and the Leader of the Opposition, Edward Seaga, give insightful replies during their Budget presentations. In the main, Audley Shaw focused on the declining quality of life, brought about by the high debt services and poor management, while the Opposition leader focused on discussing the dubious benefits of joining a CSME, linked to the declining productivity in the country, and then advocated a fixed exchange rate regime for Jamaica.
Both analyses were not without their own suggestions of changes in economic policy paths. In analysing both these presentations, we, however, must be careful that we take all the evidence into the picture and not just look at selective bits, or we will be like the various blind men who felt different parts of an elephant and concluded that there were all feeling a different object (hose, tree, spear etc.).
Mr. Shaw's references to the 'run with it' tax package of last year and the build-up of debt a bit are useful in highlighting the limited options that we have reached, but a bit like his samurai bond offer of previous year, cannot be used to change the current debt costs. Jamaica's debt burdens are the result of significant accumulated government strategies, done by both the JLP (in the 1980s re the external debt) and the PNP (in the 1990s, re the internal debt, especially as regards FINSAC intervention). We have to deal with this high debt cost over the next 10 years of budget, if we are ever to be fortunate enough to curb the high servicing costs.
This is not to say that Mr. Shaw's presentations did not have some useful suggestions, such as ways to increase funding to the beleaguered social services (i.e., reduce consultant use, bringing down interest rates, and divesting any more profitable public sector owned assets). I would go further and suggest cuts in SESP Parliamentary allocations; delayed introduction of constituency expansion ( hey, I would prefer a slight cut but this is unlikely to happen); and monthly fiscal monitoring of each ministry.
Mr. Seaga's presentation, I felt lacked the current relevance of looking at what has happened to Argentina since the year 2000. Indeed, it was the flexibility of the exchange regime in Brazil that allow it to cope better than Argentina in dealing with the current crisis. Hanke has never impressed me with his pro-dollarisation arguments, as earnest readers of this column would know. I took great issue with Professor Hanke's arguments when he was brought here to speak on such matters. To be fair Hanke has since stated that it is not applicable to every country but I will always bat for a truly independent central bank, given the success of the Eastern Caribbean Central Bank. Both parties need to work at developing this for the BoJ.
Seaga's proposal to avoid the Caribbean Single Market and Economy (CSME), due to the low productivity of Jamaica, low trade flows and high interest rate costs in Jamaica, makes no sense in the wider picture of becoming competitive. I thought the CSME introduction would have been the ideal case used to emphasise why we cannot afford cuts in the education initiative below the agreed percentage allocation, since we have to develop our human capital to cope with a CSME in the future. The changing labour trends worldwide are going to continue, whether we like it or not, and the world is going to proceed with, or without Jamaica, whether we are ready or not. His educational figures used for education as a percentage of GDP by Jamaica brought this out clearly. The fixed exchange rate regime is interesting since others in his party (read his Opposition speaker on Justice in this newspaper) have not supported this. Jamaica's long history with all the possible exchange rate regimes makes us the world expert on the most suitable exchange rate system. In the end, it boils down to which system can generate the most confidence at a particular point in time.
In concluding, I felt that both presentations were quite useful in giving us an alternative look at other options but, since we all desire lower interest rates, lower debt servicing costs, and no new taxes, we need to ask ourselves how can we increase the productivity levels to bring about the desired outcomes we wish. The presentations from both sides of the House have lacked this so far.
