Dr Adrian Stokes, senior investment manager at Jamaica Money Market Brokers (JMMB), is advocating the implementation of laws that would force the Government of Jamaica to practise fiscal responsibility.

Speaking at the Private Sector Organisation of Jamaica's annual economic forum, which was co-sponsored by JMMB, Stokes argued for a divorce of fiscal and monetary disciplines from the political cycle.

"If the Government and the Opposition agree on fiscal responsibility, why not implement a law to formalise the agreement?" Stokes asked at a forum held Thursday in Kingston.

He said some would argue that the implementation of laws might be restrictive.

Fiscal-responsibility laws

But the fiscal-responsibility laws to be created, Stokes said, could include escape clauses to give flexibility.

He also recommended movement to accrual accounting to properly deal with hidden liabilities, which he said, would increase transparency and limit fiscal surprises.

He added that tax reform was also essential.

"Broaden the application of GCT with very few exceptions," he said. "Government can conduct means-based tests to determine the revision of subsidy to the most vulnerable."

Turning to the issue of the exchange rate, Stokes recommended that the Government continue to float the local currency, leaving the market to drive its value.

"Floating the exchange rate is better to act as a shock absorber when the economy is prone to external real shocks - for example, like what we are having now," he told the forum.

"It is better to have a floating exchange rate. If Jamaica had a fixed exchange rate during the current crisis, then fiscal belt tightening would have to be more severe to accommodate the external fallout."

'Truly independent'

Stokes also advocated that the central bank be "truly independent" and that the central bank governor be appointed by a bipartisan committee.

Under this system, the central bank governor would report directly to Parliament on a quarterly basis to explain monetary developments.

He argued that if the central bank were independent, it would be impossible for the Ministry of Finance to monetise the domestic debt.

"Give the central bank a mandate to target inflation within a particular band," he said. "Report to Parliament where there is a deviation."

In addition, Stokes said, similar to central banks in major economies worldwide, monetary deliberations should be recorded and released to the public.

dionne.rose@gleanerjm.com