FINANCE AND Planning Minister Dr. Omar Davies has disagreed with critics that Jamaica was currently in an economic crisis, noting that although it was severely indebted and was facing a huge fiscal imbalance, those were only two characteristics of such a situation.
In a presentation entitled, "Challenging situation but no crisis", made to journalists at The Gleaner's downtown Kingston office last week, Dr. Davies argued that there were at least seven other attributes of an economic crisis, which were not all apparent in Jamaica at this time.
Those include a shortage of foreign exchange, chaos in the foreign exchange market, loss of confidence in the local currency, shortage of international reserves, an unsustainable current account deficit, financial sector difficulties, high inflation and low growth.
Among the fiscal challenges he outlined during the presentation was that the deficit would widen to 8.4 per cent of Gross Domestic Product (GDP), four per cent below its target of 4.4 per cent. There were also the challenges of a fall off in revenues due to a series of floods last year, slower that anticipated recovery in the tourism sector following the airborne attacks on New York and Washington on September 11, 2001, as well as the perennial problems of crime and violence.
Dr. Davies said challenges have also been posed by higher than expected expenditure on post-flood reconstruction, increased security costs, public sector wage settlements, and a fall out in property tax collections for public cleansing and the funding of street lighting.
While admitting that it was too burdensome to correct the fiscal imbalance during this the 2002/2003 fiscal year, he said that among the short-term corrective measures was a tax package that has been put in place to yield $1.2 billion by March. The Government will also be restructuring the property tax regime to bring the ratio of revenue to GDP to 30 per cent, as well as implement expenditure containment measures.
The medium-term measures include a firm commitment to balance the budget by financial year 2005/2006 by amending legislation to ensure greater tax compliance, incorporating informal economic activities in the tax system, a reduction in domestic interest rates and taxing interest income of statutory bodies.
Dr. Davies said economic growth would be boosted by major infrastructural developments, including Highway 2000, phases two and three of the North Coast Highway project, expansion of port facilities, including the Gordon Cay transshipment port in Kingston, and modernisation and expansion of the Sangster International Airport in Montego Bay.
Economic growth would also be stimulated by expansion in the mining sector, major capital investments in the telecommunications sector, recovery in traditional agricultural crops such as sugar and coffee, and a sustained war against crime and violence.
And Professor Gordon Shirley, executive director of the Mona School of Business, said that although all has not gone well, the policies being pursued by the Government were consistent with those used by developing countries that have succeeded, and, therefore, there could be no turning back.
He was speaking at a seminar hosted by the Jamaica Customs Department at the Jamaica Conference in downtown Kingston last week.
