Edward Seaga (left), Leader of the Jamaica Labour Party, makes his presentation at the Jamaica Chamber of Commerce board meeting at the Terra Nova Hotel in Kingston yesterday. Anthony Chang, President of the Chamber is seated beside him. - Michael Sloley /Freelance Photographer OPPOSITION LEADER Edward Seaga promised yesterday to enact three Money Bills in Parliament to prevent future ministerial influence on monetary policy and secure an enabling environment for local and overseas entrepreneurs.
Mr. Seaga said if his Jamaica Labour Party (JLP) was elected to govern at the General Election, expected later this year, he would take the bills to Parliament within three months.
"It is a pledge of my party that if we are asked to run the government again, to enact it within the first hundred days because we want to make sure by sending the signal that money supply is going to be put beyond the realm of ministerial preferences and jurisdiction," Mr. Seaga told Jamaica Chamber of Commerce (JCC) directors at their board meeting at Terra Nova Hotel in Kingston.
Mr. Seaga introduced the Bills in 1994 which called for 100 per cent backing of the local currency, a restriction on lending to the government by the Bank of Jamaica (BoJ), except temporarily in cases of emergency, and for those measures to be entrenched in the Constitution.
Insisting yesterday that the meltdown of the financial sector in the 1990s was due to mismanagement and a lack of understanding of the local economy, the Opposition Leader said legislation ought to be implemented to prevent the perennial ebb and flow of the economy.
"The failure to understand the role of money supply was the critical element that created the collapse and the failure to manage the problem was the second element of the failure," he said. He added that the Government allowed money supply to grow by 45 per cent, while inflation and interest rates grew by 44 per cent and 43 per cent respectively around 1996.
Mr. Seaga said that to mop up the liquidity the Government suddenly reduced money supply, forcing commercial banks to borrow money from the Central Bank because the banks didn't have enough entrepreneurs to borrow money so they could earn from the interests charged.
"They (banks) couldn't work their way out of the problem because liquidity was tight. So not being able to work your way out of the problem but being stuck with high interest rates you had to pay, the system went down," Mr. Seaga said.
In calling for debate on the Money Bills, Mr. Seaga said Jamaica's economic growth should not be thwarted in the future as it had been in the past.
The Opposition Leader said the Money Bills, when passed, would ensure that money in circulation and base money or reserves at the BoJ could not exceed the equivalent of the Net International Reserves (NIR).
"Once that is covered, you theoretically would get rid of inflation, swings in your rate of exchange, you would even bring your fiscal deficit under control and, therefore, you would be taking care of three of the most important macroeconomic indicators," Mr. Seaga said.
