David Salmon | ‘Moving in the Right Direction:’ A student’s perspective on the Budget
Many times, the sequel to an award-winning blockbuster fails to captivate eager patrons interested in the narrative crafted by the director. However, it is pleasing to note that this year’s budget presentation, aptly titled, ‘Moving in the Right Direction,’ is a worthy sequel to its critically acclaimed predecessor, ‘Growth with Equity.’
Not lacking in flare or substance, Minister Clarke’s presentation has joined the Godfather II in the halls of commendable cinematic mastery. Bearing in mind the fallout from the COVID-19 pandemic, the minister’s presentation struck the right chord with the direction the country should be going in, with regards to strengthening institutions, enhancing the environment for businesses, while ensuring fiscal prudence.
Curiously, the budget presentation began with an unexpected prologue about the significance of Jamaica being a nation that enjoys political freedom, rule of law and human rights. Minister Clarke emphasised the cherished role that institutions play and the fact that the nation is in uncharted waters.
He said, “We need to be conscious and aware of the fact that we are attempting to do that which does not have much precedence – to grow and develop as a nation from developing to developed, within a liberal democratic model.” It is this line that summarises the heart of his presentation.
For Jamaica to continue on its path to development, the creation of robust institutions is necessary. The competence and efficiency of the public sector is essential to achieving this objective. It is on that basis that the announcement of the creation of the Marcus Garvey Public Sector Graduate Scholarship Programme is welcomed as an important measure to improve the productive capacity of the public sector.
Ensuing qualified public sector workers have the opportunity to learn from worldwide institutions at the postgraduate level is crucial, given the local policy implementation deficit which plagues the Government. This initiative indicates that there is an acknowledgment of the challenge of human capital deficiency in the country. Therefore, announcing this programme was, for me, an important scene in the theatrical release of the minister’s presentation.
Additionally, identifying the challenges of having large sections of the economy being informalised was also refreshing to note. In light of this, incentivising new entrepreneurs to formalize their businesses is extremely beneficial to the overall economy. It should be noted that, after the introduction of last year’s budgetary mechanisms, like the abolition of the minimum business tax, the incorporation of new companies increased by 95 per cent, compared to the corresponding period the previous year.
With that being said, providing a tax credit of $375,000 to every Micro, Small and Medium Enterprise that files their taxes in Jamaica is a noteworthy step that encourages fledging entrepreneurs. Additionally, slashing the asset tax for financial institutions by 50 per cent will also contribute to building a robust business environment by incentivising financial institutions to reduce their fees. Despite some observed stubbornness, I am hopeful that, with this measure, fewer financial agencies will maintain their dogmatic reluctance to lower their charges. Thus, these measures build on last year’s progress by further strengthening the business environment.
The announcement of these measures was also coupled with the recognition of the challenges that youth face after graduating. These challenges include the adjustment time needed to balance the work-life experience, which is often characterised by more financial responsibilities. Hence, changing the period in which students should start repaying student loans from six to 14 months is an important step to ameliorate the financial burden faced by new graduates.
Another commendable element of this year’s presentation was the announcement that $800 million will be spent to introduce a modest social pension for vulnerable members of the elderly community who are not a part of a public or private pension programme.
Professor Denise Eldemire Shearer has noted the need for greater support of the elderly community, in light of the fact that the country is experiencing the ageing of its population. With the introduction of this programme, the Government is providing greater support for this community while practising social responsibility.
By extension, encouraging financial prudence is consistent with the Budget’s overall theme. By offering a history of the origin of Jamaica’s exorbitant debt burden, Minister Clarke has recognised that the deficit spending that savaged the economy in the past should not be continued. No longer should Jamaica have to self-mutilate its economy with the hatchet of uncontrollable debt. This acknowledgement is crucial if we are to handle our affairs by being masters of our fate.
When speaking to Keith Duncan, president of the Private Sector Association of Jamaica (PSOJ), after the presentation, he highlighted, “The fact that we can continue on our downward debt trajectory to reduce our debt-to-GDP level to 60 per cent by 2025/2026 … has freed up significant amounts of cash that can be used to reduce GCT, asset tax and give MSMEs credit while also looking at a contingency fund for COVID-19. That is a very good Budget, and it shows what you can achieve as a country once you are fiscally disciplined.”
Despite these positives, Jamaica is still at the crossroads of its economic future. Macroeconomic stability should be celebrated, given our history. However, this stability does not equate to exponential growth. Neither should Jamaica blindly possess an unrestrained belief that this stability will last, given the tumultuous global economic environment. With the dark storm clouds of COVID-19 having reached our borders, and the country still heavily reliant on the services sector, grave challenges will face the nation and its economic future.
Consequently, Jamaica will face a whirlwind of trepidation that will test the administration’s ability to wade through the potential recession. The Government’s initial response is encouraging. Nevertheless, it is welcoming to possess the knowledge that, as we brace for the impending storm, at least we are heading in the right direction.