John Myers Jr., Business Reporter

Senator Don Wehby, Minister without Portfolio in the Ministry of Finance, says funds being sunk into sugar and the national airline could be financing social programmes. - File

Senator Don Wehby, Minister without portfolio in the Ministry of Finance and Public Service, is insisting that national airline, Air Jamaica and the Sugar Company of Jamaica (SCJ) must be divested if the Government is to cut the fiscal deficit and reduce the public debt.

He has also signalled that the Finance Ministry will be coming to the table with a plan to cap both the debt, now running at 134 per cent of gross domestic product, as well as the fiscal deficit.

Responsibility for the carrier was added to Wehby's portfolio earlier this month.

The senator, who is in the process of recruiting an aeronautical expert to advice the Govern-ment on divesting the airline by 2009, says Air Jamaica's losses would likely reach $4 billion this year.

Its accumulated losses in a decade now top US$1 billion (J$71 billion).

Wehby, who left his high-paying private sector job three months ago to serve in the new Jamaica Labour Party government under a mandate to tighten fiscal control, said the two debt-ridden state entities were consuming resources that could otherwise be spent on improving the country's education and health systems and provide other well- needed social services.

The combination

He pointed to renowned tax expert Professor Vito Tanzi's advice that "a combination of a low fiscal deficit with a high growth rate of the economy would help to reduce the public debt".

The SCJ, which is carrying a debt burden of more than $14 billion, is expected to be divested by June this year, Wehby said, based on a timetable given to Cabinet by Agriculture Minister Dr. Christopher Tufton.

"I believe a lot of Jamaica's current fiscal problems are attributable to inefficient management of the Government's resources. I am particularly concerned about the current budget system," said the senator.

"I believe there is potential for better management and execution of this process," Wehby said Tuesday night at an economic forum hosted by Jamaica Money Market Brokers Ltd. at the Terra Nova Hotel in New Kingston on Tuesday.

Technically, he said, the process was sound and appeared to be rigorous on paper, but there was "much scope for improvement" and potential savings of billions of dollars to be derived from greater fiscal discipline.

"A paradigm shift is needed in our budget process," he stressed.

To bring about this paradigm shift, Wehby is exploring the possibility of "performance-based budgeting techniques and the introduction of a Fiscal Responsibility Act".

A performance-based budgeting system would link monies spent by governments with the results achieved from this spending and provide incentives for meeting clearly defined targets as well as accountability for any deviation that may occur. This, Wehby said, has worked in developed countries like Canada.

Fiscal deficit limit

As it relates to the Fiscal Responsibility Act, the minister explained that such legislation would involve putting a limit on the fiscal deficit and the country's debt to GDP ratio, and would only be lifted in emergencies on approval of a two-thirds majority in both the upper and lower houses of Parliament.

"Such an act would also include binding fiscal rules on the use of borrowed funds and extra budgetary funds (and) caps on certain categories of expenditure as well as minimum spending for essential services," Wehby said.

The process, he added, must begin with tax reform, ostensibly to encourage compliance among taxpayers in the hunt for bigger tax revenues as offsets.

john.myers@gleanerjm.com