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Jamaica trade deficit with T&T down
Jamaican imports from T&T fell by US$177.7 million according to the latest available data from the Bank of Jamaica. On January 16, Bank of Jamaica Governor Brian Wynter released economic data on the Balance of Payments 2012, as well as during a speech at the Jamaica Manufacturers’ Association’s 2014 Economic Forum. Exports from Jamaica to T&T totaled US$21 million in 2011 and US$18.3 million in 2012. Exports from T&T to Jamaica totaled US$880 million in 2011 and US$702.3 million in 2012. The 2011 numbers are revised figures, and the 2012 are estimates. With a negative trade balance of US$859 million in 2011 and US$683.9 million in 2012, Jamaica took US$175.1 million off its trade deficit with T&T, according to the data. T&T continues to be Jamaica’s number one trading partner in Caricom. Guyana, Suriname and Barbados are Jamaica’s second, third and fourth trading partners in Caricom. Jamaica’s imports from Guyana totaled US$51.1 million in 2011 and US$40.6 in 2012., while exports totaled US$6.7 million in 2011 and US$9.8 million in 2012. Its imports from Suriname totaled US$34.6 million in 2011 and US$46.1 million in 2012 and exports were US$5.1 million in 2011 and US$5.4 million in 2012. Imports from Barbados totaled US$32.2 million in 2011 and US$26.3 million in 2012 and exports shot up from US$9.3 million in 2011 to US$23.5 million in 2012.
However, the decline in imports from T&T appears to be only a reflection of what was reduced spending in the pressed Jamaican economy. When askedwhat he thought was driving the decline, KC Confectionery Sales Director Ashmeer Mohammed, a director of the T&T Manufacturers’ Association (TTMA), said he had not seen a decline in purchase orders from Jamaica. Wynter said Bank of Jamaica’s “monetary policy is focused on lowering the rate of inflation to levels consistent with inflation in our major trading partners”. T&T’s inflation up to November 2013 stood at 4.4 per cent while Jamaica’s was 10.1 per cent. Wynter said lowering inflation “is fundamental to the achievement of the goals outlined under the (Jamaican) government’s medium-term economic programme supported by the agreement with the International Monetary Fund (IMF)”. The principal objective of this programme is to reduce the national debt and raise the sustainable growth rate of Jamaica’s national output, Wynter told forum participants. To achieve the first objective, Wynter said, the Jamaican government has committed to implementing revenue, expenditure and debt management measures to ensure the debt goes down in relation to gross domestic product (GDP).
“This commitment entails the achievement of annual primary surpluses of 7.5 per cent of GDP over the life of the programme. With this, the borrowing need of the government has fallen sharply, which is leading to a steady reduction in the debt to GDP ratio to below 100 per cent by 2020, from 147 per cent (as) at March 2013,” he said. In support of this, the Jamaican government intends to make the current fiscal responsibility framework stronger by developing “binding fiscal rules”, he said. “This will increase transparency, lock in the gains of fiscal consolidation and ensure that budgets will be sustainable even beyond the end of the four-year IMF agreement,” he said. Feeling intense economic after-shocks from the 2008 global financial crisis, Jamaica turned to the IMF for financing. In May 2013, Jamaica sealed a deal with multilateral agencies to get nearly US$2 billion in loans over the ensuing four years, from the IMF, the World Bank and the Inter-American Development Bank (IDB). A central plank of the programme is the implementation of structural reforms aimed at creating an environment supportive of economic growth, Wynter said. “One of the main structural reforms to which the Government has committed is the improvement of the tax system, including tax administration. In this regard (Jamaica’s) Parliament, from as early as June last year, adopted amendments to the Revenue Administration Act to, among other things, give the taxman the power to access third-party information relating to taxpayers and to require mandatory filing for groups of taxpayers and types of taxes,” he said.
Fiscal incentives legislation was also passed in December , he said. This “overhauls and simplifies decades of tax law to the advantage of productive businesses.” To kick-start growth, the government has started to implement catalytic, strategic, public-private investments. “Already, the government has initiated production in six agro-parks, aimed at (food) import substitution,” Wynter said. “The objective is to develop a total of nine such parks by the end of 2014,” Wynter said. The government of Jamaica is also committed to improving the competitiveness of the economy through legislative and administrative changes, he said. “Supporting these reforms will be the preservation of a stable macroeconomic environment through sound monetary and fiscal policies. Inflation this fiscal year will fall nearer to the midpoint of the target range of 8.5 per cent to 10.5 per cent, despite the impact of exchange rate depreciation and increases in bus fares and utility rates last year,” he said. “Inflation is expected to decline over the medium term towards our long-run objective. This decline in inflation, in conjunction with a more competitive exchange rate, will foster increased price competitiveness of Jamaica’s exports of goods and services.” Lower inflation will also allow Jamaican businesses to finance investments at lower interest rates, he said. The reduction in fiscal deficits and the public debt will make more resources available to the productive sector and “will complement (the) Bank of Jamaica’s thrust to maintain single-digit inflation.”
The Jamaican economy began its recovery during the September quarter, registering growth of 0.5 per cent. “We expect that growth of a little under one per cent will materialise for the fiscal year, in line with our projections. As the economy stabilises, the fiscal and external balances improve and the debt ratios are brought down towards sustainable levels. We should see the Government being able to address more effectively important social and developmental issues, such as education and training and crime and social peace,” Wynter said.