LAST YEAR was the year when the nation's debt problem was laid bare. This is evident in a quick review of the economy's performance. From as early as April, with the assumption of the $100 billion FINSAC debt on the Budget, Finance Minister Davies warned that even with the most concessionary financing, heavy debt servicing costs would remain with us for at least another 10 years.
Soon after the presentation of the Budget, with the heavy rains in May, the Finance Ministry had to negotiate a new fiscal deficit target (the shortfall in government revenue) with the IMF. Government had initially targeted a -2.8 per cent deficit but adjusted it to -4.6 per cent to enable it to assist with flood relief expenditure.
The economy settled down in the summer months presumably to take advantage of the relative economic stability occasioned by low inflation, falling interest rates and record net international reserves. This stable period was short-lived, however, as with the approach of the Christmas season the traditional peak season of demand for foreign exchange the authorities hiked short-term rates to contain slippage in the foreign exchange rate. The Bank of Jamaica hiked its 90-day and 120-day repo instruments by an average of two percentage points.
Then with the General Election out of the way and the presentation of the $13 billion Supplementary Budget, there was the admission by the Finance Minister that debt targets were moving in the wrong direction. Additionally there was the attendant downgrading of the country's rating from stable to negative.
All this is not to say there were no positives last year. Some companies took advantage of the "stable" macro environment and reorganised their businesses. Grace, Kennedy, for example, announced that its net profits had passed the billion-dollar mark. There was also heightened competition in the telecom sector with attendant benefits for consumers. Additionally, the Construction and Financial sectors were definitely on a growth path.
However, the year ended under such a heavy debt cloud that made the positive glimmers of hope appear overshadowed. As the new year unfolds there is a growing realisation that there can be no dancing, however creative, around the debt problem. It must be faced squarely. Having sown the winds of the debt crisis we are now reaping the whirlwind.
THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY REFLECT THE VIEWS OF THE GLEANER.
