Delroy Chuck
THE RICH countries have finally realised that the Highly Indebted Poor Countries (HIPC) cannot repay their debts. The citizens of these HIPC are in serious danger of starvation and the spread of diseases, as most are deprived of basic governmental and social services and their economies are in tatters. These HIPC have suffered, and are suffering, under the crushing burden of debt repayments to international and bilateral lenders. Most likely, at the summit of the G8 rich countries, next month, some debt forgiveness for the HIPC will be announced.
By any measure, Jamaica should rank among the HIPC, with our debt to GDP of over 140 per cent. However, most of our debts are due to private lenders and, thus, we are not even being considered for debt forgiveness. Like the HIPC, Jamaica's main preoccupation is with the burden of debt. At the present time, we are in no danger of default, and cannot afford to default, as we want to borrow more on the domestic and international market to meet our indebtedness. But, just how long can this ever increasing indebtedness continue before we, too, like the HIPC, admit that we cannot repay our debt?
HIGHEST DEBT
When Argentina defaulted on its debt obligations, its debt to GDP ratio was 47 per cent, and many countries with similar debt to GDP ratio have simply suspended their debt repayments. Economically under-performing countries are soon forced to make a choice between debt repayments and the collapse of their social services. Will Jamaica ever have to make that choice? Are our social services not being sacrificed on the altar of debt repayments? To be sure, Jamaica's debt obligation is easily one of the highest in the world. If most of our debt were not domestic, we would have defaulted long ago.
Now, Minister Omar Davies is trekking all over the globe to seek more private lenders to convert our domestic debt to foreign debt obligation. While most countries are seeking debt forgiveness and supporting the campaign to drop the debt, Jamaica is busily increasing its stock of debt. Under this administration, Jamaica's indebtedness has increased from just over 4 billion US dollars to over 12 billion US dollars, and there is little to show for this increased debt obligation. Our health, education, justice, security, roads, social and other services have deteriorated and are much worse now than 10 or 15 years ago. In essence, increased indebtedness is not helping the country but merely increasing the burden for the next generation.
EVERY COUNTRY BORROWS
In truth, debt is not necessarily a bad thing, if it is used to improve the quality of life and to boost a country's productive effort. Virtually every country borrows money, from domestic or international lenders. The most heavily indebted country in the world is the USA, which owes over 6 trillion dollars. Supposed the USA, also, asks for a debt write-off? America does not have a problem with debt, in spite of the amount owed, because its people are creating wealth and producing goods and services for the rest of the world to buy. The countries that have a problem with debt, like Jamaica, are those unable to exploit their natural resources well or to create an investment and economic climate for the competitive production of goods and services.
CONDITIONALITIES NEEDED
The drop-the-debt campaign needs support but it cannot be a complete write-off, to allow the countries to go on another borrowing spree. It must have some conditionalities to force the HIPC to turn their economies around and boost their productive efforts, otherwise the debt forgiveness will be just another wasted attempt by the rich countries to reform corrupt, incompetent and inefficient regimes. A better path would be to suspend the debt for a fixed period of 5 to 10 years to allow the HIPC to recover, and the debt forgiven if the HIPC meet agreed economic targets and revive their collapsing social services.
For Jamaica, the crushing burden of debt is contributing significantly to the breakdown of law and order and the increasing decay in our inner cities. The inability of our government to pay our police, teachers, nurses and civil servants better is due primarily to the constitutional priority to make debt repayments. Yet, there is little hope that we will benefit from the drop-the-debt campaign. Our campaign must be to meet the challenge of increasing our economic and productive efforts to delay or avoid the choice between debt repayments and the survival of our social services.
Delroy Chuck is an attorney-at-law and Opposition Member of Parliament. He can be contacted by email at delchuck@hotmail.
