Don Wehby | Why I back the Fiscal Commission Bill
Below is an edited version of a contribution to the debate on the Independent Fiscal Commission Act, 2021.
I support the Independent Fiscal Commission Bill, 2021.
Last year when this House debated the suspension of the fiscal rules to extend the debt-to-GDP target date to March 31, 2028, I indicated that the establishment of a Fiscal Council must be prioritised, so that we can have in place a body that will provide the level of oversight and hold the Government accountable to staying on track to achieving the gross domestic product (GDP) target.
So, I am very pleased that this bill is being debated.
I am also pleased that the bill is a product of broad stakeholder consultation with stakeholders such as the Caribbean Policy Research Institute (CAPRI) and international partners. I commend the minister of finance in this regard. The establishment of the commission is consistent with the Government’s commitment to secure Jamaica’s gains under successive economic reform programmes with the International Monetary Fund (IMF) and build on the success of domestic partnership initiatives.
When the IMF executive board completed its sixth and final review under the standby arrangement for Jamaica in 2019, it endorsed the set-up of a fiscal council.
The commission will replace the Economic Programme Oversight Committee (EPOC), which was established in 2013. EPOC is an example of how private, public and civil society can partner together in the interest of Jamaica. I commend all the individuals who have served on EPOC for their roles in monitoring Jamaica’s macroeconomic targets and reform commitments in support of public accountability and sustaining fiscal discipline.
Lack of fiscal discipline led to high debt to GDP ratio over the years. In financial year (FY) 1991-1992, the debt-to-GDP ratio peaked to 193.5 per cent.
We must never go back there. We can’t spend more than we earn. We will go bankrupt as a nation.
Jamaicans have worked too hard and made too many sacrifices to reverse the gains we have made to reduce the debt-to-GDP ratio and improve our economic outlook.
Prior to the economic shock brought on by the COVID-19 pandemic:
• Debt to GDP ratio fell to 96 per cent for FY 2018-20191
• Interest rates were at their lowest
• There was record quarterly growth in the economy
• Unemployment was its lowest in 40 years
• Our stock market was number one in the world
• Tax revenues were ahead of budget
• Business confidence was at its highest
CAN’T GO BACK
The commission will enhance the governance structure so that we can continue this path to economic independence.
We can’t spend more than we earn. We can’t go back there. We will go bankrupt as a nation.
By and large, there is consensus that well-designed fiscal councils are associated with stronger fiscal performance and better macroeconomic and budgetary forecasts. Key features of effective fiscal councils include operational independence from politics, the provision or public assessment of budgetary forecasts, a strong presence in the public debate, and the monitoring of compliance with fiscal policy rules.
In reviewing the functions of the commission under Section 3 of the bill and based on my research, I believe that the commission’s functions are aligned with international best practice.
It is important for the Government to indicate to the public whether it accepts the commission’s forecasts and analysis and provide an explanation where there are deviations. This approach will help to promote transparency and accountability.
While the commission’s role in maintaining fiscal discipline is important, so, too, is the political will. I recall the words of the Governor General Sir Patrick Allen in his Throne Speech: “The Government and the Opposition must set the example and be constantly engaged in a new dialogue, respectful of their differences, but deeply mindful that the Jamaica that unites us is infinitely greater than the political parties that divide us.”
I believe the Government and Opposition agree on the importance of the commission and I look forward to more consultation and cooperation regarding the implementation of economic policies.
According to Section 3 of the bill, it will be a commission of Parliament and is, therefore, required to submit reports on its performance pursuant to Section 16.
These reports must be reviewed carefully and in detail.
The review of the commission’s reports must also include a performance evaluation of the work of the commission during the period under review, to ensure that the commission is held accountable for fulfilling its mandate.
One of the other issues which I noted during my research is the constraints on the work of fiscal councils because of availability of resources.
I noted that Section 17 provides for the appointment of a Fiscal Advisory Committee comprising members representative of different facets of society, such as academia and the private sector.
These committee members must be equipped with the technical skills and training necessary so the committee can be a valuable resource to the commissioner in the execution of the work of the commission.
I am confident that the Fiscal Commission will be a very useful mechanism to promote economically sustainable fiscal policies.
- Don Wehby is a government senator. Email feedback to email@example.com