The group representing most of the big businesses in Jamaica has criticized the Bank of Jamaica (BOJ) for increasing its interest rates over the past six months, a decision it says will result in reduced investment in the country over the medium and long term.
The Private Sector Organisation of Jamaica (PSOJ) says the central bank increasing its policy rate by 4.5 per cent while also buying and selling securities for as much as 7.7 per cent is further driving up inflation and making long-term borrowing difficult for businesses.
“The EPC (Economic Policy Committee of the PSOJ) has been very concerned, not just of the policy rate but because of financial market conditions which have been very aggressive, and I believe that it is squeezing the economy at a level that we cannot afford”, EPC co-chair Dr Adrian Stokes said Wednesday.
He was speaking at the PSOJ’s virtual forum on Tracking the country’s Macro-Economic Performance this year.
Stokes, however, rejected the idea of reducing the primary surplus target to facilitate more spending on social services at this time.
He noted that the primary surplus had actually been reduced in recent years, coming from 7.9 per cent in 2019, adjusted to 3.5 per cent in 2020 to deal with the pandemic, and is now at 6.3 per cent.
“The key thing to remember about the primary surplus is that it has a direct impact on debt reduction, which is the chief policy anchor of fiscal policy in Jamaica.
“As a country we should be laser-focused on reducing the debt in a sustainable way. It is this laser focus and discipline that has seen the debt fall from 150 per cent (of GDP) a few years ago to be on track to reduce the debt to 69 per cent of GDP in four years time.”
Reducing the primary surplus, Stokes would result in increased borrowing by the government, crowding out of the private sector and putting the country back in a position of overwhelming debt.
Commenting on the recent unrest of public sector unions pressing for wage increases, Stokes called for a broader discussion on public sector transformation to deliver quality service to the public.
“It is very unfortunate that we are singularly focused on wage increases in the public sector instead of public sector transformation, which includes paying people more, but also how do we modernize government, how do we attract great talent within the public service and how we ensure that public sector becomes that enabling service that drives economic growth”, he said.