Dialogue on debt
published: Tuesday | January 21, 2003

D.K. Duncan

THE PRINT media has devoted an overwhelming majority of their available space to comments on the ECONOMY - especially in the last week. The electronic media, primarily the talk-shows, have been no less attentive to this subject.

Ian Boyne, Don Robotham, Earl Bartley and Robert Buddan were all very incisive in the same edition of The Gleaner on Sunday, January, 19 2003. Ralston Hyman in Sunday's Herald was his usual probing self, while Garnet Roper offered a perspective. Dennis Morrison and Hughlyn Boyd were at one in the Observer of Wednesday, January 15, 2003. Most commentators took a refreshing Political Economy approach.

I recommend the reading of these recent articles in the three national newspapers. The call by Ian Boyne for a more widespread base of information on economic issues is worthy of support. It might be useful to pull together a summary of the various analyses and proposals in one document.

In the meantime, I offer a restatement of excerpts from an article by me published in The Gleaner of Tuesday, May 14, 2002. Titled - "Jamaica's Debt Trap - Towards a Dialogue" - it was a companion piece to two other articles published in The Gleaner on Tuesday, April 23 and May 21, 2002. These articles were written during and immediately after the close of the 2002 Budget Debate - some five months before the General Elections of October 16, 2002.

Forty years after political Independence - 40 years into the search for economic independence viability or prosperity - we are solidly ensnared in a most vicious trap. Predicted and predictable - the Debt Trap is essentially of our own making. We must take responsibility and act. The first general elections in the new millennium (2002) is an appropriate juncture at which to take stock, and resolve to chart a reliable course out of this dilemma.

The Minister of Finance recently presented to Parliament the proposed Estimates of Expenditure for the financial year April 2002 to March 2003. He also, presented the Government's plan to finance the expenditure. These plans were approved by Parliament on Wednesday, May 1, 2002 after the Finance Minister made his closing speech.

The principal presenters in the exercise which began on Thursday, April 18, were the Minister of Finance, the Prime Minister, the Opposition Leader and the Opposition spokesman on Finance.

The speakers ranged far and wide - more consistent with a State of the Nation review. However, a central theme was the debt problem and the proposals and plans for its management.

The article continued:

The budget calls for an expenditure of $210 billion. Therefore, an income of the same amount must be found. We only have $126 billion in real income. This is derived from $117 billion in taxes and $9 billion from divestment proceeds. However, as a first charge on income we plan to pay out $135 billion in debt servicing (principal plus interest). Therefore, we are $9 billion short before we begin to pay salaries ($65 billion) or start/continue new projects ($10 billion). We need to find an additional $84 billion. We plan to borrow this addition $84 billion in order to cover our expenses. In essence, we are 'borrowing from Peter to pay Paul.'

It is clear, that from these figures, we are in a downward spiral leading once again to predictable consequences.

The article further asserted:

Jamaica's total debt as of March 31, 2002 was $495 billion. The external debt is $195 billion and the domestic debt is $300 billion. Debt as a percentage of Gross Domestic Product (GDP) is now at 134 per cent. The Opposition spokesperson on Finance Audley Shaw tells us that internationally the critical level is 60 per cent. The Minister of Finance tells us that present plans will result in a reduction of this figure by 2004/2005.

There has been a significant increase in domestic borrowing in recent years. The present figure of $300 billion includes $100 billion arising from FINSAC activities. Economist Dennis Morrison, writing for the Observer states: "the tough truth is that our debt problem is largely related to the size of the domestic debt and the level of local interest rates".

The recent action by Standard and Poors (S&P) relates primarily to their concerns about our debt burden. Everybody, including S&P is concerned about the fiscal deficit. The more we have to pay to service our debt, the less we have available to deal with the fiscal deficit.

More Jamaicans need to join the debt dialogue. One love, one heart.

More Commentary