Davies
Al Edwards, Financial Editor
WITH THE economy being in the best shape it has been for years, and with a growth rate of between two and three per cent, the Minister of Finance and Planning, Dr. Omar Davies, said barring any unforeseen calamities, this year's budget will be balanced.
He was the special guest speaker at a Mayberry monthly investor forum held at the Knutsford Court Hotel, New Kingston, on Wednesday evening.
"In terms of our expectations for the fiscal year, our target had been a fiscal deficit of between three and four per cent. Even as we speak, a conservative estimate is that we can make 4.4 per cent, which is slightly outside our target, but I had warned the country that the demands for additional expenditure would create a little difficulty. However, I promised the country that we would meet our targets for fiscal year 2005/2006. Let me repeat it, the balanced budget for 2005/2006 is immutable. We are going to make it."
Turning his attention to the country's debt mountain, he said a third of the country's domestic debt was as a result of the formation of FINSAC, but that it was necessary to form that body in order to ensure that Jamaicans reposed confidence in its local financial institutions. Without it, he said, the Jamaican professional classes would have gone to the wall.
He noted that the Jamaican economy was in the best position it has been in years with a renewed sense of confidence. The local stock market is bullish, the currency is stable, investors are looking to do business and the financial sector has fully recovered.
REVIEW OF TAXATION SYSTEM
Against this background comes a comprehensive review of the taxation system which was ordered two years ago.
"The report has come in and Cabinet will be reviewing the recommendations. The last comprehensive review of the tax system was carried out many years ago, and what has happened over the last 20 years is that a number of special interest groups have sprung up wanting concessions. What is needed now is simplicity and an equitable system."
Turing to the ascendancy of the euro, the minister of finance said that its present position is helpful to the country, particularly as far as the growth in China and improvements in commodity prices are concerned.
He noted that the advent of the Caribbean Single Market and Economy (CSME) added an
interesting dimension to the Jamaican economy.
THINKING OUTSIDE THE BOX
"My own view is that given the extent to which we have liberalised our economy relative to the other countries, it is important that our private sector and labour unions do not fear the changes the CSME will bring. Rather, they must grasp the opportunities. Jamaica should, in my opinion, lead all the initiatives in the CSME. I know that our financial sector can make inroads into the wider Caribbean. But at the same time, I am very much in favour of regional investment in Jamaica let me make that clear. To those of you who want to draw the nationalistic card and say 'keep them out', let me say I am not a supporter of that. We welcome all investors as long as I can see how and where the funds are coming from.
"The CSME means that Jamaican companies must now start thinking outside the box and must think of their growth instead of being constrained by the 2.5 million people who reside here."
Looking at the coming fiscal year, Dr. Davies noted that inflation and the fiscal balance will be higher than targeted. As of now, the fiscal balance stands at 4.4 per cent but the minister will be looking to bring that figure down.
"My prediction for both calendar and fiscal year 2005 is that the recovery will continue. The Net International Reserve is significantly above where we had set it. This is related to the improvements in the balance of payments. All things being equal the GDP growth is going to be higher. We are dealing with an economy where good things are happening. There is no reason why we cannot have a better year than last before Hurricane Ivan took its toll on the country. My confidence is bolstered by the fact that in the medium term we shall be seeing an unprecedented level of investment in all sectors. Saying that, I would like to see greater involvement from local entrepreneurs in this period of economic activity."
