THE MAJOR task facing the Jamaican Government in April, will be to find a workable fiscal Budget that will last longer than the parchment that it is written on, before the usual revisions are made to it.
A lot of coincidental and favourable factors are going to have to occur this year to facilitate a prudent Budget for FY 06, as no matter how they 'slice it and dice it', they will have to leave several groups displeased just to keep creditors away from Jamaica's door. In short the major task will be how best to solve this budget conundrum of needing to meet vital targets and yet not having adequate funds to cover them.
This will not be an easy task this year, as with the end of the old MoU agreement there are rising expectations by various labour groups seeking to play 'catch-up' and reverse the fall in their real wages over the last two years. There has also been the failure to make a sizeable dent in getting tax compliance from the informal sector; and the large debt burden continues to stymie the country's public sector entities and institutions from generating significant surpluses, as the finance minister becomes even more pressed than the island's fire services in seeking to put out (financial) fires.
While ideally we would love to see a high real GDP growth rate (five per cent or more), a low inflation rate (five per cent or less); a stable exchange rate; a lower unemployment rate (we are talking about a realistically lower unemployment rate that sees falls in the level of unemployed and under-employed): and a lower public debt (that actually reduces it to be below 100 per cent of GDP).
MORE THAN JUST PRAYER
But wishes do not always come true and, to achieve even half of these targets is going to take much more than just prayer and good luck. It will also take a considerable increase in productivity; a rise in consensus among traditional adversarial groups; and survival of major exogenous shocks that could prove disastrous, such as higher oil prices, major hurricane damage, and steep percentage point rises in external interest rates in major financial capitals.
To develop our social capital, we must build up our financial capital. The latter means that the anaemic growth rates of the past cannot continue. We have to boost output by significant efforts to develop and maintain infrastructure, or social development will crumble for lack of funds.
I cannot see how any of this can be done without tight monitoring of our budget. While the balanced budget target is out for this fiscal year, any expenditure budget that surpasses J$360 billion will continue to put pressure on our debt costs. The wage bill clearly has to be kept under control despite pleas by special interest groups to be the most favoured; off-the budget items need to be controlled, and the government has to avoid giving out so many guarantees.
A decision on Air Jamaica will have to be made soon, to determine whether the airline is going to be allowed time to achieve its recovery or do we just cut our losses and do without a national airline, however damaging to prestige this may be to some). But unless much more rigorous legislation is brought to bear on tax evaders and greater care is put into fighting 'white collar criminals', we may continue to find our revenue targets overo ptimistic, forcing further borrowing.
