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Strategies for Stimulating Growth and Sustainability John W. Robinson Deputy Governor Bank of Jamaica. 4th BIENNIAL INTERNATIONAL CONFERENCE ON BUSINESS, BANKING AND FINANCE ‘Restoring Business Confidence & Investments in the Caribbean’ 22 – 24 June 2011 Trinidad & Tobago.

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Strategies for Stimulating Growth and SustainabilityJohn W. RobinsonDeputy GovernorBank of Jamaica

4th BIENNIAL INTERNATIONAL CONFERENCE ON BUSINESS, BANKING AND FINANCE

‘Restoring Business Confidence & Investments in the Caribbean’

22 – 24 June 2011

Trinidad & Tobago

outline
Outline
  • Sustained Economic Growth
  • Role of Government
  • Strategies for Stimulating Growth in Jamaica
    • Economic Transformation Programme
      • Progress to date
  • Concluding Remarks
sustained economic growth
Sustained Economic Growth
  • A steady increase in the productive capacity of the economy.
  • In the medium to long run, production possibilities are enhanced by improvements in technology, the quantum and quality of the labour force as well as the capital stock.
  • Fundamental considerations
    • Issues of the quality of education and the cost of capital
    • Adequacy of supporting infrastructure
    • Environmental sustainability
    • Social and economic stability
role of the government
Role of the Government
  • Provide an enabling environment for private sector led growth

-macroeconomic, social and political stability,

- sound physical infrastructure

- secure property rights

- stable financial system

- well-trained labour force

- competitive markets

- efficient public sector

- environmental sustainability

strategies for stimulating growth in jamaica
Strategies for Stimulating Growth in Jamaica
  • Jamaican economy grew by 0.8 per cent over the last decade.
      • Despite relatively high rates of investment.
  • Weak growth performance attributed to low productivity.
      • Reflecting the influence of macro / microeconomic and social factors.
  • Relatively unstable macro environment
      • Embedded in elevated public debt levels
      • Adverse debt dynamics
      • Relatively high rates of inflation
  • Resulted in distortion of private investments
      • Difficult to project production costs, cash flows and rates of returns.
      • High interest rates environment
    • As such, long-term investment decisions were either postponed or shelved, while some new ventures folded.
main elements of current economic strategy
Main Elements of Current Economic Strategy
  • The main areas of focus of the transformation programme are:
    • Restoring fiscal discipline and debt sustainability
    • Enhancing financial system stability
    • Improving the business environment
fiscal discipline debt sustainability
Fiscal Discipline & Debt sustainability
  • Primary objective
    • Elimination of the fiscal deficit over the next four years
    • Institutionalization of prudent fiscal practices
  • Strategies
    • Voluntary par-for-par exchange of domestic bonds for longer dated, lower coupon instruments (JDX)
    • Establishment of a fiscal responsibility framework
    • Implementation of a centralized treasury management system
    • Public sector reform
    • Divestment of non-core assets
financial system stability
Financial System Stability
  • Primary objective - reduce systemic risk
  • Strategies
    • Amendment of BOJ Act to give the Bank responsibility for overall financial system stability
    • Development of an Omnibus Banking Law
    • Strengthening prudential framework of securities dealers,
    • Combating unregulated financial schemes
    • Improving the regulatory framework for collective investment schemes
enhancing the business environment
Enhancing the Business Environment
  • Primary objective – Enabling business environment
    • Comprehensive transformation of the tax system
      • To reduce distortions & inefficiencies & stimulate growth
  • Strategies
    • Simplify the tax system, widen the base and improve equity mainly through the streamlining of waivers and exemptions.
    • Elimination of stamp duties on financial transactions & transfer tax and stamp duties on registered corporate securities.
supporting infrastructure
Supporting Infrastructure
  • Achieving sustainable economic growth also require adequate supporting infrastructure, physical and social.
    • Physical
      • Investments through the Jamaica Development Infrastructure Programme (JDIP)
    • Social
      • Special emphasis placed on early childhood development
      • Training for the out of school population
      • Improving teacher quality
      • Restoration of law and order
progress to date
Progress to Date
  • Fiscal Discipline & Debt Sustainability
    • Successful implementation of JDX in February 2010.
    • All quantitative targets under the IMF-SBA programme have been met.
    • Divestment of Air Jamaica and Sugar Company of Jamaica Holdings.
    • Fiscal responsibility framework passed in Parliament.
    • Pilot CTMS .
    • Public sector transformation plan tabled in Parliament.
  • Financial System Stability
    • Amendments to the Bank of Jamaica Act have been drafted.
    • Phased introduction of risk weights for foreign currency denominated GOJ securities (started June 2010).
    • Draft Omnibus Banking Law is being prepared.
progress to date cont
Progress to Date (Cont)
  • Enhancing the Business Environment
    • Stable Macroeconomic Environment
      • Trend decline in inflation & interest rates
      • Improving business confidence
    • Single tax authority established
    • Streamlining of customs procedures
    • First phase of the reforms implemented in the FY2011/12 budget
      • Elimination of stamp duties on financial transactions.
      • Abolition of transfer tax and stamp duties on registered corporate securities.
conclusion
Conclusion
  • The major challenge for policy makers is the restoration of sustained economic growth.
  • The recent global crisis exposed a number of underlying weaknesses in the Jamaican economy, to which the Government responded with a raft of far-reaching economic reforms.
  • The macroeconomic programme is being complemented by initiatives to enhance social capital.
conclusion1
Conclusion
  • Jamaica has made notable progress in its economic programme
      • very stable macroeconomic environment
      • improving business confidence.
      • indicators suggest that Jamaica should emerge from the recession in the first quarter of 2011
  • However, transitioning from recovery to sustained high growth rates will require a long-term commitment by the society to the process of economic reforms and social transformation that have begun.
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