By Lavern Clarke, Staff ReporterOF A new US$130 million World Bank loan package, US$75 million will be used to pay down some of Jamaica's higher cost FINSAC debt, specifically those relating to National Commercial Bank and RBTT, Finance Minister Omar Davies announced Friday.
RBTT was formerly Union Bank, a merger of four failed commercial banks bailed out by the Government.
The minister made the announcement as he addressed the issue of reversing the fiscal deficit.
Since the new administration took office last week, local analysts have questioned the policy mix Dr. Davies has been pursuing as well as Government's insistence on containing inflation by protecting the exchange rate at the expense of interest rates.
"We will not accept that devaluation as a specific targeted policy is the way to go," he said. "The issue is how do we, over time, bring interest rates down on a sustained and credible basis."
Jamaica recorded two per cent growth last year, but its debt also climbed to about $500 billion.
Countering a specific recommendation by economist Dr. Gladstone Bonnick, Dr. Davies said Friday that he refuses to put a cap on the debt, now at about 133 per cent of Gross Domestic Product. The US$75 million loan forms forms part of a larger US$129.8 million loan package approved by the World bank last week.
The Minister said if he capped the debt, he would be left to grapple with how to pay public sector workers.
He indicated that to manage the deficit he would continue with the strategy of limiting public sector spending, improve revenue collections, and go after those now outside the tax net.
The limit on spending will not impact the 15 per cent allocation of the capital budget for social and community related projects, Dr. Davies said.
