Duncan sees role for EPOC after fiscal commission is created
The new economic policy oversight body being created as the arbiter of Jamaica’s rules on budgeting and government spending has passed the legislative hurdle but a date for its commissioning is yet to be determined. The bill to enact the...
The new economic policy oversight body being created as the arbiter of Jamaica’s rules on budgeting and government spending has passed the legislative hurdle but a date for its commissioning is yet to be determined.
The bill to enact the Independent Fiscal Commission, IFC, was passed in both chambers of Parliament earlier this year, but by Finance Minister Dr Nigel Clarke’s admission, the law will not come into force for quite some time, due to the mechanics of setting up and staffing the new entity.
Until then, the eight-year-old Economic Programme Oversight Committee, EPOC, remains in place. The oversight committee was set up initially to monitor Jamaica’s bail-out agreement with the International Monetary Fund with both state and private-sector representatives as members, but continued beyond the completion of the IMF pact as a private-sector monitor of the Jamaican Government. It has no legislative weight.
Keith Duncan insists that EPOC, for which he is chairman, has been an effective oversight mechanism in monitoring the Government’s qualitative economic targets, priority policy commitments and reporting to the public on these and on the overall economic reform programme.
As to EPOC’s future role once the Fiscal Commission becomes operational, Duncan said in an interview with the Financial Gleaner that the matter was being discussed with the Government.
“There needs to be a monitoring mechanism, possibly inside of the national partnership body, which could be a subcommittee of the National Partnership Council that would specifically monitor the economic reform programme and programmes like the economic recommendations of the COVID-19 recovery task force,” said the EPOC chairman, who is also president of the influential Private Sector Organisation of Jamaica.
“There have been discussions with the prime minister and the minister of finance about this aligning with the National Partnership Council. That is the thinking as to where it should be placed, and this would be independent of the IFC,” he said. The National Partnership Council is chaired by Prime Minister Andrew Holness.
The Fiscal Commission will provide a second opinion to the Government’s on the country’s faithfulness to fiscal rules that are legally binding on the state.
The work to bring the new oversight body Fiscal Commission into operation is ongoing, but there is no definitive date on when that will end.
“We have to recruit the person to function as the fiscal commissioner, recruit staff, set up the office, put in place the legal agreements that would be required for the exchange of information between the Government and the fiscal commission,” said Clarke. “It could take between a year or two, but I don’t want to be held to that (precise timeline) yet,” he said in an interview with the Financial Gleaner.
The finance minister sees the fiscal commission as a prescription for resolving what he considers to be a generational problem of ‘unsustainable financing’ – and therefore worth the wait.
“It does not just impact a single year or two years, it impacts an entire generation, who suffer from the Government’s inability to allocate to critical areas such as health, education, to invest in capital expenditure to improve the quality of life. We have seen how unsustainable fiscal management crowds out the private sector, does not allow for dynamic economic activity and for people to be employed, and for the country to prosper and grow,” Clarke said.
“An Independent Fiscal Commission represents an institutionalisation of fiscal responsibility for Jamaica now and over the long term,” he said.
As a permanent body, the commission will have the staffing and budget necessary to carry out detailed technical analysis of economic issues and produce several reports each year, including a debt sustainability analysis.
“EPOC does not have the capacity to do the deep level of technical analysis that the IMF used to provide, because we are all volunteers. What the IFC is slated to do is to provide that deep analysis to protect the Jamaican taxpayers. Within the IFC as provider of the deep analysis and reviews, and the independent arbiter of fiscal rules, there will also be the fiscal advisory committee, which will be a stakeholder group like an EPOC,” Duncan points out.
Following the latest cessation of Jamaica’s borrowing relationship with the IMF, EPOC replaced the Fund as a monitor of Government’s achievement of agreed economic targets.
While noting that fiscal bodies similar to the IFC exist in more than 40 countries, especially in the aftermath of the 2008/2009 global economic crisis, Clarke points out that Jamaica has not simply copied the structure from other countries, but has created an institution based on its experiences and needs.
The advisory committee, for example, which advises the fiscal commissioner, is to include representatives from a wide cross section of the society appointed by the governor general on the advice of the Government in consultation with the parliamentary Opposition. Minutes of meetings of the fiscal committee are also to be made public.
The finance minister is also making a connection between the work of the IFC and the goal of securing and maintaining broad macroeconomic stability as a permanent expectation among the Jamaican population.
“Macroeconomic stability – having financial sector stability, low and stable inflation, sufficient reserves in the central bank, and debt sustainability all at the same time – is a precious commodity that we have not had for at least 40 years before now,” he said.
He suggests that the achievement of conditions of macroeconomic stability by the current Government has made it possible for the state to mount a robust response in the face of the COVID-19 pandemic, to assist vulnerable Jamaicans, make up for lost revenues, as well as to finance economic recovery programmes, including the roll-out of a national vaccination drive.
“That is what it means to have flexibility at the bottom of the economic cycle to respond,” Clarke noted.
“The fiscal commission will not agree with the Government on everything and disagreement is not a sign of anything being wrong. Economics is not a precise discipline and economists will disagree on projections,” he said.