Section of Mr. Shaw Budget Presentation.
Mr. Speaker, what is the background of this Budget Debate?
The PNP Government inherited a stable economy in January 2012, in which for the first time in a long time, all the major macroeconomic indices were simultaneously pointed in a positive direction.
– The Net International Reserves stood at US$2.0 billion with gross foreign exchange reserves at US$2.8 billion.
– The exchange rate was stable for over 2 years, at J$86:US$1.00
– Inflation was in the 6 percent range
– Interest rates – a key driver of new investments large and small – had reached single digit, with mortgage companies competing in single digit rates
– Confidence had returned among key stakeholders
– We left in place a blueprint for real reforms to taxation, pension and the public sector with the tabling and commencement of parliamentary review of Green Papers and a report of the Public Sector Transformation Unit (PSTU).
– Not surprisingly the economy, after the ravages of the global financial meltdown grew by 1.5 percent in 2011.
– Jobs were being created again from the expansion of the economy.
Mr. Speaker, this is what was left in place.
And let me state without any fear of contradiction that this stability was in place, despite the global recession, the massive increase in oil prices never seen since the 1970’s; the massive decrease in our bauxite revenue – only comparable to the 1980’s; and, despite the lack of IMF reviews under the previous Standby Agreement for several quarters.
And let me repeat, this lack of review was not due to any fundamental disagreement with the IMF – except on the issue of the pace of adjustment of major structural reforms as well as our decision to honour a contractual commitment to pay arrears to public sector workers – a decision we do not regret.
Indeed, the sister multilateral institutions, as late as November 2011 were sufficiently satisfied with the progress of the JLP government and signed off on US$318.0 million in development policy and project loans (water, energy and tax administration) from the World Bank and the IDB, respectively.
Mr. Speaker, this is the background that was left. It is the indisputable, irrefutable and incontrovertible truth.
Let me make it clear that the Opposition rejects without hesitation or equivocation, the politically charged assertion of the Minister, that when he took over “Jamaica was drifting on a sea of hopelessness and despair”.
Mr. Speaker, nobody either inside or outside of this House, believes such ridiculous statement.
But where are we today? Here is where the Minister’s words really fit. Sixteen (16) months after this government took over the reins of leadership with promises of a rapid IMF Agreement, abandonment of chicken back and steak and oxtail in abundance.
– The Net International Reserves has declined to less than the benchmark 12 weeks of imports, standing at US$884.0 million the lowest level in over 11 years.
– The exchange rate has slipped precipitously close to J$100.00 to US$1.00 with the re-emergence of a virulent Black Market for foreign exchange which is trading informally at between $105 and $110, and pricing now being done at higher levels. Some companies are quietly cutting staff as they are unable to get foreign exchange to purchase raw materials.
– In consequence, prices have moved to new and unprecedented atmospheric heights, with the price of basic foods increasing at an alarming rate, much higher than the officially stated average inflation rate. Basic foods prices have increased by a range of 20-60 percent over the past 16 months. Chicken back flew from $40 to $80 per pound, and a 2-pound loaf of bread has increased by $85 from $180 to $265. A whole chicken costing $700 is now a luxury for many.
– Mr. Speaker, people are suffering in Jamaica today. Fathers and mothers are struggling to keep food on the table and send their children to school. Farmers are trying their best with high prices for inputs, unpredictable weather and low prices for their produce and the Taxi man can’t make ends meet. His expenses are:
Earns /day $6,000
Owner’s fee $2,000
Take home $500
– The value of grants to PATH beneficiaries is shrinking with devaluation. People are hurting and reeling from punishing price increases from downtown to uptown. These punishing price increases across all sectors is marginalising the middle and working class and making the poorest of the poor more poor.
– Interest rates are beginning to point in the wrong direction again, threatening the stability of the real estate market and the opportunities from small business expansion. This is after we brought interest rates to the lowest period it has been for over 20 years.
– The unemployment rate is rising again. The unemployment rate was 13.7 percent at the end of October 2012 versus 13 percent when the Jamaica Labour Party left office. This is moving in the wrong direction despite this government’s promise of JEEP. The unemployment rate among young people was 35.3 percent in October 2012, 4.2 percentage points higher than the 31.1 percent reported for October 2011.
– And for the 5 consecutive quarters that this Government has been in charge, the economy has declined in every quarter.
– Not surprisingly, business confidence fell in the December quarter last year to its lowest in four years.
– The Jamaica Conference Board said that in the December quarter “Consumer confidence remained flat when compared with the previous quarter, but was less buoyant than before, having discarded the optimism they expressed at the top of the year following a change of government.”
Some say that the IMF might be too little, too late.
– Too little as there could be a negative outflow of funds to the IMF in the near term, and too late because the other multilateral flows may not be at a sufficiently rapid pace to adequately augment the decline in the NIR. This is so as the IDB and the World Bank will require unique performance measures of their own to trigger loan disbursements.
– In the meantime, ill-conceived taxation has been imposed without an informed framework, sharply increasing import fees, placing a burdensome 167 percent increase in property taxes on those who are tax compliant (which is likely to increase the delinquency rate), while re-imposing higher stamp duties and transfer taxes, corporate taxes, dividend taxes and assets taxes on businesses that would otherwise use these funds for expansion and job creation.
– In consequence, consumer and business confidence is down, purchasing power of consumers is down, and the economy continues to decline. Last year, we were told “it tun up till it bun up” now “it a dry up”.
– And while we boast that cutting the size of the Cabinet represents mere symbolism or “optics”, we can’t find money to send a little water to drought-stricken sections of the island while crops wither on the vine and rural folk are losing their livelihood. That’s not “optics” that’s real people suffering! The savings from the “optics” of a smaller Cabinet could truck water to suffering people.
– There is no doubt that poverty has increased over the past 15 months. The government must hasten the publication of the Jamaica Survey of Living Conditions, for which there has been no report since 2010