University of the West Indies Pro Vice-Chancellor Densil Williams has poured cold water on the Government’s Social and Economic Recovery and Vaccine Programme for Jamaica, known as SERVE, which he declared is not bold enough to accelerate the level of growth needed for the country’s economic recovery.
Speaking at last Wednesday’s post-budget analysis forum put on by Victoria Mutual Building Society and its wealth management subsidiary, VM Wealth Management, and the Jamaica Chamber of Commerce, Professor Williams, while identifying several shortcomings of the SERVE programme unveiled in Parliament on Tuesday by Finance Minister Dr Nigel Clarke, put forward a complementary recovery plan. That recovery plan, which he dubbed the Banking Economic Recovery Investment (BERI), is a JM$82-billion initiative that addresses both the monetary and fiscal side of the economy.
Professor Williams told the virtual post-budget forum that BERI would provide the impetus for aggressive economic growth contrary to the SERVE project, which is not bold enough for the current extraordinary times the country is now facing. The $60 billion SERVE plan is mostly concentrated on infrastructure spending to kick-start the economy, along with $10.5 billion in special resources for the Ministry of Health, including $6 billion for the procurement, storage, distribution and administration of COVID-19 vaccines, with the balance spread across other ministries and agencies of government.
CURRENT RECOVERY PLAN IS INADEQUATE
In his presentation, titled Budget 20221/2022: Credible for normal times; not bold for extraordinary times”, Professor Williams, a trained economist, said the current recovery plan unveiled in the finance minister’s budget presentation is inadequate to drive the accelerated growth needed at this time. He released a preliminary research he did, which showed that at the present growth trajectory, which has Jamaica hovering over about 0.7 per cent over the past many years, it would take the country as long as a decade to reach the level of 2019 in 2030/2031.
This is assuming that the country manages to achieve a sustained three per cent growth per year. Having put the right stimulus in place, he said the country could grow as much as four per cent to five per cent per year on average, which could see the recovery shortened to 2025, where the country would then reach its 2019 level of growth.
The UWI vice-chancellor expressed doubt that the JM$301 billion set aside in the budget for expenditure on programmes geared at funding initiatives that will spur growth “is robust enough to generate the type of economic growth that we are going to need to recover, and most importantly, get back those 135,000 workers back into employment.”
He was making reference to Dr Clarke’s pronouncement that COVID-19 has caused 135,000 Jamaicans to now be out of jobs. However, he admitted that the SERVE programme is a good building block but by itself is inadequate.
DETAILS OF THE BERI PLAN
The BERI plan, according to Professor Williams, “is not a one-year plan but a medium term plan, which is essential for a stronger recovery”. A crucial part of the plan is the establishment of a Special Purpose Vehicle to take over the debts of small businesses which have gotten into financial trouble because of the pandemic.
This initiative would seek to free up the books of the banking sector, which will be then able to fund more economic endeavours to grow the country, while allowing these small businesses to remain operational until they become strong enough to start repaying their bad debt. This initiative, Professor Williams said is calculated to cost $36 billion.
In terms of direct transfer of money into the hands of consumers to spend and thereby jump-start the economy, Williams proposed a plan costing $24 billion, which could see direct transfers of $20,000 each month over a six-month period to the most vulnerable in society. He also proposed a 20 per cent reduction in income tax moving the rate from 25 to 20 per cent, which should cost around $12 billion, which is needed for the middle class.
These are direct transfers, he argued, which would create aggregate demand in the economy. Professor Williams proposed the establishment of an investment fund of $46 billion, which would mobilise entrepreneurship in the country. This would include a $1-billion grant to the creative sector, which has been a forgotten child in the pandemic, in addition to other funding to support businesses.
Professor Williams made the point that these expenditures would be returned to the Government with the economy growing again.