Thu | Aug 16, 2018

Mark Ricketts | What’s there to worry about!

Published:Sunday | July 29, 2018 | 12:00 AM
Nigel Clarke

Last Sunday, Finance Minister Nigel Clarke was on form waxing about Jamaica's outstanding economic performance. So impressive was he when speaking to an area gathering of JLP party supporters that I am sure those in the audience and those hearing him on TVJ's nightly newscast had to be on cloud nine.

Surely, there is nothing to worry about when our finance minister, in an animated and convincing fashion, provided this impressive list of positives: Jobs are up, unemployment is down, poverty is down, and so are interest rates. Continuing itemising his upbeat presentation, Dr Clarke pointed out that capital expenditure by the private sector is up, capital expenditure by Government is up, spending on social programme is up, and spending on protecting the vulnerable is rising.

To maintain the rhythm in articulating successes, he could have referenced the record-breaking performance of the hospitality sector, the continued buoyancy in business processing outsourcing (BPO), and the ongoing gains from the structural adjustment programme.

Dr Clarke might have revved up his presentation even more had he waited a few days later when the country benefited significantly from the Government's sustained lobbying initiative in getting the US to relax sanctions against the Russian-owned Windalco.

The 1,200 workers at the Ewarton bauxite plant who have been surviving on pay cuts and the diminution of activity at the plant during the last several months must breathe a sigh of relief, and so will their families and a wide circle of beneficiaries, given the multiplier effect of that sector.

Offering a message of hope to those who might be losing faith because of the slide of the Jamaican dollar, governor of the Bank of Jamaica, Brian Wynter, noted on Wednesday that our real focus should be on the rate of inflation. For the first six months of the year, the rate was 2.8%. This suggests that prices of the weighted basket of goods and services purchased by the average householder have not increased that much.

In an interview on TVJ on Wednesday night, the governor pointed out that recently the dollar has been moving up, as well as down, suggesting a sideways drift. He added that people become more alarmed when there is an adverse movement of the exchange rate, but they tend to forget the reversals in the recent past.

To further calm the fears of Jamaicans, he said the exchange rate in a flexible market is a function of demand and supply, and changes will occur from week to week. While there might be slippage, the BOJ governor assured the nation that he was not seeing a shortage currently, as the country has adequate foreign exchange, a point reinforced by the finance minister who cites the more than US$3 billion in reserves.

Surely, the nation can take comfort and recite the oft-repeated phrase, 'Why worry? Jamaica, no problem.' We could even draw on Bob Marley's favourite line, "Don't worry 'bout a thing, 'cause every little thing gonna be all right."

However, some domestic and international happenings are troubling. For one, the deepening trade conflicts are creating uncertainty in financial markets, pushing investors to move out of at-risk currencies, especially those in emerging markets, and into the US dollar, thereby accounting for much of its appreciation.

 

CURRENCY UNDER PRESSURE

 

If this trend continues, along with inevitable increases in interest rates, Jamaica's currency, which is now at its lowest point in history, will be under further downward pressure. That, combined with tariff-driven price increases in the US, our largest trading partner, will account for upward price movement in imported consumer goods and manufacturing input.

Further troubling is that oil price increases arising from general instability in the world, together with the collateral damage we are likely to face from sanctions, will continue to pose some difficulty in us shrinking our US$4-billion annual visible trade deficit.

Price increases are coming at a time of severe compression in the economy as a result of the massive build-up in arrears of companies, agencies, and institutions, and an evident need for them to capture much of their outstanding. For example, the National Water Commission has served notice that it intends to collect the $26 billion it is owed, and JPS is doing everything to correct the US$103 million (J$13.3 billion) it has lost to electricity theft in the last 18 months. That, coincidentally, is 18% of the electricity the company produces.

Jamaica has never been good at designing and allowing its educational system to deal with its infrastructural needs, its export growth potential, and its domestic wants.

Take agriculture, for example. This should have been our lifeblood for success as far as employment, exports, and overall economic growth are concerned. But, as always, we have been weak on storage, harvesting, markets, marketing, distribution, financing, capital goods, crop data, technology, security, and a well-maintained rural road network.

Compounding this weakness is the fact that in a land of wood and water, we have never seen it fit to devote the necessary human, financial, and physical capital resources to have the best water-storage and distribution system in place. So, over the years, six months after a deluge, our farmers are handicapped by drought.

Last year, the country spent so much time bemoaning the fact that excessive rain accounted for less-than-stellar GDP growth performance. This year, with heightened expectations, we forgot that water availability and agriculture go hand in hand. Now there is a drought. Portland is hurting, as well as St Ann and St Elizabeth, where farmers, as miracle workers, have always been able to make something out of nothing.

But now, hope is lost. The land is sterile in sections of St Elizabeth, and the farmers are distraught. Can't we see our country is not serious about doing what is needed to secure growth and development?

The size of the country's debt and the high levels of debt repayment limit the Government's ability to undertake the requisite spending for technology, renovation, infrastructure, and modernisation. In the meantime, the National Water Commission is racking up huge deficits, made worse by drought, water restrictions, and lock-offs, and the Jamaica Urban Transit Company, under the most ridiculous urban transportation policy and route arrangements, is haemorrhaging taxpayers' money.

Compounding our woes are weaknesses in governance practices where human resource talent is jettisoned by an emphasis on partisanship and loyalty at the expense of talent, merit, and competence.

Until as a country we institutionalise order, human talent, and a culture of excellence, we do have to worry.

- Mark Ricketts is an economist, author, and lecturer. Email feedback to columns@gleanerjm.com and rckttsmrk@yahoo.com.