The group representing most of Jamaica’s big business has criticized the Bank of Jamaica (BOJ) for raising interest rates over the past six months, a move it says will lead to reduced investment in the country in the medium term. and long term.
The Private Sector Organization of Jamaica (PSOJ) says the central bank is raising its policy rate by 4.5% while buying and selling securities by up to 7.7%, further pushing up inflation and makes long-term borrowing difficult for companies.
“The EPC (PSOJ’s Economic Policy Committee) has been very concerned, not only about the policy rate, but because of the conditions in the financial markets which have been very aggressive, and I think they are squeezing the economy to a level that we cannot afford,” EPC co-chair Dr Adrian Stokes said on Wednesday.
He was speaking this year at the PSOJ’s virtual forum on monitoring the country’s macroeconomic performance.
Stokes, however, rejected the idea of reducing the primary surplus target to facilitate more spending on social services at present.
He noted that the primary surplus had actually been reduced in recent years, from 7.9% in 2019, adjusted to 3.5% in 2020 to deal with the pandemic, and now stands at 6.3%. .
“The key thing to remember about the primary surplus is that it has a direct impact on debt reduction, which is the main anchor of fiscal policy in Jamaica.
“As a country, we should focus on debt reduction in a sustainable way. It was this laser focus and discipline that saw debt fall by 150% (of GDP) a few years ago to be on track to reduce debt to 69% of GDP in four years.”
By reducing the primary surplus, Stokes would lead to increased government borrowing, crowding out the private sector and returning the country to a crushing debt position.
Commenting on recent unrest by public sector unions demanding pay rises, Stokes called for a broader discussion on transforming the public sector to deliver quality service to the public.
“It is very unfortunate that we are only focusing on public sector pay increases rather than public sector transformation, which involves paying people more, but also how to modernize government, how to attract great talent to the within the public service and how do we ensure that the public sector becomes that enabling service that drives economic growth,” he said.