Caribbean & Central America - October 2009 (ISSN 1741-4458)

In our review of the Jamaican economy last month, we noted that Prime Minister Bruce Golding's Jamaica Labour Party (JLP) government was so far remarkably unscathed by the economic crisis.  Despite GDP declining by 3.9% in the second quarter of 2009, in a recent poll only 24% of the public blamed the government.  This charitable view is likely to be tested to the extremes as the prime minister moves to shore up the public finances.

There are some positive straws in the wind. Finance Minister Audley Shaw is now predicting annual inflation of 10%-12% or lower this year, down from 16.8% in calendar 2008, due to exchange-rate stability and moderating international commodity prices. Year-on-year inflation in August fell sharply to 6.1%, in contrast to 26.5% in August 2008. This has also enabled the Bank of Jamaica to begin easing interest rates.  Shaw is now forecasting an overall real GDP decline of 3%-4% for the Jamaican economy in Fiscal Year (FY) 2009/10 (ending 31 March).

Remittances - which on some estimates may fall by as much as US$360m in 2009 from a total US$2.2bn in 2008 - have shown signs of improving. Inflows were up 8% year-on-year in August and likely to have risen again in September.

Less positively, fiscal deficit projections for FY 2009/2010 have been revised upwards to J$94.5bn, from J$75bn in 2008/09. That is the equivalent of 8.7% of GDP. Golding warned the parliament's standing finance committee on 30 September that it was now time “to make a paradigm shift", saying, inter alia, that the public sector wage bill “cannot be sustained". Insisting on the need to cut the wage bill, Golding stated; “Some departments and agencies will have to be eliminated". This retrenchment will be accompanied by “a full programme" of tax reforms in the next financial year.

There are 117,000 public-sector jobs in Jamaica, and with existing pledges for pay increases for teachers and nurses, some estimates suggest that the government will have to cut 10,000 jobs in order to keep its wage bill at current levels. Any such move would affect the government's popularity.  In the aforementioned poll, 70% of respondents were disappointed with the government's failure to create jobs and prevent unemployment. And this is something that the opposition will be sure to exploit, with the People's National Party (PNP) leader Portia Simpson Miller already depicting the government as “wicked and uncaring".

But Golding does seem ready for the battle. Speaking to the Jamaican Exporters Association on 8 October, he said that he personally would lead the restructuring process so as to overcome “entrenched empires that are going to resist fiercely". He added: “There is a culture that is deep rooted that is not going to be voluntarily transformed. It is going to have to be confronted and faced down and attacked..."

That it is not just money-saving that motivates Golding was also made clear in his 1 October speech.  He noted: "Much of our public sector is governed by a structure and culture that_is antiquated, inefficient and largely irrelevant today. Efficient operations require a flatter structure, devolution of authority with responsibility and authority conjoined. It requires that every department be conscious of corporate goals and plans_It means that at every level there must be set targets and clear work plans that must be monitored and assessed virtually on a daily basis_every department and every employee in that department must be subjected to rigorous performance evaluation and accountability. "