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Government Policies

In 1997, the primary policy objective of Government was to be achieved through a financial program aimed at: lowering money supply growth to less than 1.0% per month, (10.9% for the year); reducing the fiscal deficit to 2.0% from 6.0% of GDP; maintaining a stable exchange rate; a gradual lowering of interest rates; lowering inflation to single digit (8.0% to 9.0%); and generating GDP growth of between 2.0% and 3.0%.1

The longer term framework rests against the background of the National Industrial Policy (NIP), which was released in 1996. The NIP, which builds on the Medium Term Policy Framework (MTPF) for 1996/97 to 1998/99 and several sectoral policies, such as the Energy Sector Plan, the Land Use Plan, and the National Environmental Action Plan, NEAP), further reinforces the private sector-led growth strategy which underpinned the reform efforts of the 1980s and early 1990s.

Fiscal Strategy

Government has continued its efforts to encourage private sector led investment and growth by providing a stable macro economic environment, developing a strong regulatory framework in critical sectors; and establishing a financing facility to stimulate private investment in infrastructure. Other initiatives include: facilitating export markets; product adaptation; market penetration; collaborating with the private sector in labour training; encouraging private sector free zones including those for single factories, to stimulate expansion in manufacturing; and support for small business development through increased credit and technical services.

Growth is being facilitated by increased investment and export promotion in collaboration with the private sector, with special efforts to attract higher levels of foreign direct investment in tourism, by providing support for infrastructure, and improving security. Additionally, in 1997 there continued to be support for diversification into non-traditional agriculture, divestment (sale and lease) of public lands and provision of suport services to farmers, to enable them to meet European Union quotas in sugar and bananas. These strategies are aimed at incresed output, foreign exchange earnings and rural incomes.

Monetary Policy and Inflation

The monetary authorities were successful in containing the growth in money supply during the year. Broad money (M2) increased by 13.4%, a continuation of the trend in 1996 when M2 increased by 14.5%. This monetary restraint resulted in the economy's first year of single digit inflation in almost a decade. In 1997, the CPI grew by 9.2% compared with 1988 when it was 8.5%. The inflation outcome was also due to the 4.0% nominal appreciation in the rate of exchange, which averaged J$35.58 to the US dollar compared with J$37.02 for 1996. The exchange rate was subject to strong speculative pressure during the year, but stability was maintained by the use of just over US$152.0 million of the Net International Reserves.2

Fiscal Policy and the Public Debt

The fiscal deficit for the first three quarters of the fiscal year increased, due largely to the cost of servicing the domestic debt, higher than projected wages and salaries, and lower than projected tax revenues. The deficit stood at just over $20.0 billion at 1997 December, the second successive year of deficit, signalling a reversal of the 1991 to 1996 period of fiscal surpluses. Contributing heavily to this deficit was the servicing of domestic debt, the stock of which totalled $101.4 billion by December 1997.
Under Jamaica's British-style parliamentary system, Queen Elizabeth II, as Head of State, appoints a Governor-General on the recommendation of the Prime Minister. The Governor-General is assisted by a six-member Privy Council, but his duties are largely ceremonial.

Executive power resides in the Cabinet led by the Prime Minister which is accountable to Parliament. The Prime Minister is the leader of the majority party in the House of Representatives and is appointed by the Governor-General.

The bicameral legislature is composed of an elected House of Representatives and an appointed Senate. Elections are held every five years at the discretion of the Governor-General for the 60 members in the House of Representatives. The Senate is comprised of 21 members, 13 appointed by the Prime Minister and 8 appointed by the Leader of the Opposition. All Senate decisions must be agreed to by a two-thirds majority.

The Judicial System is based on English common law and practice. Final appeal is to the Judicial Committee of the Privy Council in the United Kingdom. Justice is administered by the Supreme Court, Court of Appeal, Resident Magistrates' Court, Revenue Court, Family Court and Traffic Court.
The most recent General Election was held on December 18th, 1997 and the People's National Party (PNP) won a 3rd term.

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