By Al Edwards, Financial EditorMINISTER OF Finance and Planning Dr. Omar Davies' budget presentation for 2004/2005 was praised by US based investment banking and securities house, Bear Sterns and it commended the Government for presenting a budget that will further reduce the fiscal deficit.
It viewed the budget as sending a clear signal that Jamaica will demonstrate to its creditors that it is serious about living within its means. It has also stressed the importance of reducing and maintaining low interest rates and noted that the Government had not added any new taxes that will have an adverse impact on the business community.
A company statement on Jamaica read: "The news coming out of Jamaica continues to be positive, with all indicators pointing to one of the best environments Jamaica has faced in several years. Minister Davies confirmed that the official fiscal deficit outcome for Financial Year 2003/2004 was 5.8 per cent of GDP, which was within the target range for the year. We believe that this result was met with the help of some delays in payments to contractors and suppliers, as well as a late March pre-sale of forward payments due to the government in the coming years for the sale of the NCB bank.
"Nevertheless, the fiscal performance was impressive relative to forecasts that were prevailing several months ago. Looking forward, as we have pointed out in previous research, the government has some credibility in getting its fiscal deficit down to the three per cent to four per cent of GDP target range for Financial Year 2004/05, due to the public sector wage concessions and lower interest rates. The fiscal and debt dynamics are still vulnerable to interest rates and the exchange rate, but right now we do not see significant risks to these variables."
A leading analyst at Wachovia Securities noted that Jamaica was not out of the woods yet but definitely on the right track
TURNAROUND STORY
Taking pains to stress that these were his views and not the line held by his employer he said: "The budget presentation was as much an exclamation mark on the remarkable turnaround story of Jamaica in 2003 as it was a precursor of things to come. Last year I was very sceptical about the Minister's projections on debt service costs and his projections for the fiscal deficit. As it turns out I was right about his estimate on interest costs being on the low side but I grossly undersestimated his political will and he actually managed to come in under his target in what I can only describe as a Herculean effort in fiscal discipline."
He added that Minister Davies faced a hostile credit market which was ready to write Jamaica off but instead he turned to regional players for funding, tightening the Government's fiscal belt while at the same time producing impressive primary fiscal surpluses to address the country's huge debt.
He noted that the market has rewarded the effort with local rates coming down from the low 40/s in 2003 to the teens today.
Inflation at 16.8 per cent is problematic but remains benign largely as a result of the containment of the currency.
"Jamaican global bonds are at an all time high and for many a year it is the first time I can remember seeing the Jamaican dollar appreciating as interest rates fall and the Jamaican stock market rises."
On Monday, Jamaica reopened the 2017 Eurobond which is taxable for local investors ( non-taxable for foreign investors), for US$100 million. By all accounts the issue is already oversubscribed and Jamaica may opt to increase the size of the issue from US$100 million to US$200 million.
