THE RECENT discussion on the role of the commercial banks in pulling down loan rates faster underscores the importance of raising the bar concerning the level of debate on economic issues.
Only recently, Bank of Jamaica Governor Derick Latibeaudiere and Finance Minister, Dr. Omar Davies, upped the ante regarding the commercial banks' role in pulling down loan rates. The Minister suggested that the public should now pressure the banks to move more expeditiously in reducing their loan rates. No doubt the Minister adopted this position as the monetary authorities had reduced rates at least five times since the start of January, but loan rates had hovered in the same low 20s range for the corresponding period.
Head of the Bank of Nova Scotia (Jamaica) Ltd., Bill Clarke, joined the fray and argued that his bank would not be pressured into pulling rates down prematurely and would only do so when a clear discernible trend regarding the direction of interest rate changes was obvious.
More importantly, the BNS managing director said that his bank would be observing how the authorities acted when the high-cost interest rate instrument (over 30 per cent) issued this time last year becomes due in a matter of weeks.
He contended that the rate at which Government 'rolled over' these instruments or whether they paid them down, would give a clear indication of the likely direction of interest rate changes and the sustainability of rate reductions.
We believe that Bill Clarke's intervention in giving a banker's perspective on the issue of reducing rates at this time is indicative of the kind of balanced debate that the economy needs. Putting the contending views on the table facilitates greater public understanding of the issues that face the economy rather than the old hackneyed jaundiced strategy of identifying one group as the enemy.
While one can obviously understand the Government's anxiety in reducing loan rates, the banks' experience last March when the authorities doubled rates on Government paper, forcing the banks to adjust their deposit rates upwards, must be still fresh in their minds.
If the monetary authorities are serious about engaging the banks in a debate about pulling down lending rates, this should be done in a spirit of real compromise and an environment that respects and encourages the stating of different positions. This should be done not only for controversial issues, such as commercial bank loan rates, but even in matters that ostensibly further the public interest.
In this regard, we believe that the article by trade unionist Lambert Brown published in last Sunday's Gleaner on the latest announcement concerning Alcoa's proposed investment, promotes discussion and furthers understanding of critical economic issues.
As we enter a new phase of mutual relationships and building of public trust, ushered in by the MoU and the private sector partnership, it is critical that we conduct our economic debates in a mature, balanced manner. Appealing to the old dishonest tricks of argument may score short-term points but will ultimately do more harm than good. Let us walk the talk.
