By Halshane Burke
Opposition Spokesperson on Finance Julian Robinson is sounding the alarm over the state of Jamaica’s economy, sharply rejecting Finance Minister Fayval Williams’ claim that things are getting better.
Mr. Robinson calls that impression inconsistent with reality, arguing that the government has failed to close a $30-billion tax revenue shortfall.
The Shadow Finance Minister says, with inflation running close to 8 per cent, this could see an increase in interest rates, which will have a negative effect in the productive sector.
“When you have a revenue shortfall of almost $30 billion, it forced the government to go back to the market to borrow $30 billion, which they couldn’t raise the full $30 billion. To give this impression that the economy is doing great is really a fallacy. If you look at the cost of living pressures that are facing Jamaicans, inflation is running out almost 8 per cent, which is way above the BOJ’s range of between 4-6 per cent. I anticipate that when the BOJ Monetary Policy Committee meets, they will be looking to raise interest rates to try and tame inflation. But within the context of an economy which is still contracting, that is going to put more pressure on businesses who will have to pay more on their loans, on consumers who will have to pay more on mortgages, car loans or loans that they take out,” he complained.
Mr. Robinson said many people are facing harsh economic conditions.
“We’re far from being in a good position in the economy. We’re actually seeing the highest rates of car repossessions. We’re seeing bad loans from banks at very elevated rates. So it indicates that there is significant consumer pressure being faced. People are struggling to meet their basic obligations.
“Now, I know people are going to say that the cost pressures are driven by factors outside of our control. What is happening in the Middle East has driven oil prices up. That is true. But let me tell you what is within the control of the government. The government has the control to determine how much imported oil we use. And we have seen absolute failure on the part of this government to increase the amount of renewables that have been added to the grid,” argued the opposition spokesman.
In the meantime, Mr. Robinson said the consistent underspending of the capital budget over the last five years is starving the economy of the stimulus needed to spur growth.
“Now, what happens when you underspend it? They shift the money from capital to recurrent, which is pay your wages, salaries, etc. So it makes the fiscal situation look a little better. But it doesn’t account for the fact that we have been woefully underspending the capital budget, which is never a good thing. And our capital budget in the relative terms is small. For central government it’s 5 per cent of the budget. If you add the public bodies, it’s about 10 per cent. It is not a large number,” he contended.
He urged the government to spend its capital budget to spur economic growth.
“The reality is that for many Jamaicans who were most affected by the hurricane, either at the individual level, small businesses, they have got no assistance. And that has made it difficult for them to rebound, which is why tax revenues are running below projection,” Mr. Robinson reasoned.