WARREN NEWBY, president of the Mona Campus Youth League, a Generation 2000 (G2K) action group, has called on Dr. Omar Davies, the Minister of Finance and Planning, to implement a short-term, debt-restructuring mechanism as part of a new development plan.
Mr. Newby also suggested that, in the medium to long term, the Minister should look at GDP indexed bonds.
"The Finance Minister must put pride aside and, out of expediency, implement a debt restructuring mechanism, in the short term, which will be part of a new development plan. In the medium to long term, the Minister needs to look at GDP indexed bonds," he said.
"A formal sovereign debt restructuring mechanism would need to be built on four key features.
"First, the mechanism would need to prevent creditors from disrupting negotiations leading to a restructuring agreement by seeking repayment through national courts. This would make restructuring less costly for the debtor country, reducing the incentive for it to try to delay the inevitable unnecessarily. It would also prevent a 'grab race' getting under way among the creditors, in which each has an incentive to enforce its claim as quickly as possible to prevent others capturing the limited assets available.
"Second, the mechanism would have to provide creditors with some guarantee that the debtor country would act responsibly during the course of any standstill. In other words, that it was adopting appropriate economic policies, negotiating in good faith with its creditors, and refraining from treating some creditors more favourably than others.
"Third, private lenders would need encouragement to provide fresh money to help the debtor meet its financing needs. To achieve this, providers of new money might have some guarantee that they would be repaid before existing private creditors, that is, possibly some kind of preferred creditor status.
"Fourth, the mechanism would have to bind minority creditors to a restructuring agreement, once it has been agreed to by a large enough majority. This would prevent rogue creditors demanding repayment on the original terms and achieving leverage by securing an attachment on the assets of the debtor until they were repaid."
He said that Dr. Davies needs to take heed of the recommendation "as we do not want another Venezuela or Argentina for Jamaica."
