Chris Bicknell, Contributor
( left - right )GOLDING and PATTERSON
JAMAICA IS a heavily indebted country, with the national debt being approximately 140 per cent of the country's annual GDP. Any enterprise which is carrying such a heavy debt burden must demonstrate a sustained commitment to fiscal discipline, in order to have continued access to capita
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Therefore, out of necessity, and perhaps a growing national maturity, Jamaica has been pursuing a very tight fiscal programme in recent years. In exchange, the international capital market has been rewarding Jamaica with lower interest rates on its international borrowings and with continued access to credit to refinance our debts to make our loan repayments more manageable.
Our dynamic duo of fiscal prudence and lower interest rates is resulting in a reduction of our very high national debt ratio to less onerous levels. This requires a period of sacrifice rather than a quick fix, but it is already leading to the creation of the following 'virtuous circle' in the economy - (i) investor confidence is increasing (and local investors are beginning to follow the lead of overseas investors who, being outside the local milieu, can see our situation more clearly and have been committing hundreds of millions of U.S. dollars to Jamaica), (ii) the Government's need to borrow to finance its current commitments is being contained, (iii) local interest rates are starting to fall while our currency's value remains stable, (iv) higher rates of economic growth are being generated, and (v) public revenues will be enhanced (which allows further improvement in the national debt ratio and the acceleration of each element in this virtuous circle).
INVESTOR CONFIDENCE
Jamaica's access to the international capital markets underpins this entire process. It is ultimately the source of investor confidence in our economy, and therefore provides a stable economic environment in which business plans can be formulated and executed. Furthermore, the interest rates on our international capital market borrowings set the benchmark rates at which local investors are willing to provide capital within Jamaica.
It is only by maintaining and improving our 'bankability' that the virtuous circle described above can continue to turn. If we stay on track in reducing national debt and promoting economic growth, the country will in the coming years enjoy budgetary room to spend more money to improve education, security, health and other vital social services. It will provide government with options that it does not currently have, to give the youths hope and life skills to be productive citizens by improving incentives for small businesses, farmers and manufacturers that will create employment, and by improving sports and recreational facilities in depressed areas.
The frightening alternative to international credibility is the loss of confidence, evaporation of investment flows, capital flight, a return to unsustainable interest rates, the undermining of the value of our currency, leading to financial and social instability. This will cost Jamaica dearly and retard our national development for decades to come. The stakes are therefore very high at this fragile but vital point in our history. It is therefore essential that any future leader of Jamaica must understand the importance of preserving and safeguarding Jamaica's reputation as a bankable nation, and must be capable of protecting that reputation. Our future leader must understand clearly that 'bankability' is built on deeds and performance, rather than symbolic gestures and nice sounding words. At this particular juncture in our economic development, first and foremost, we need a leader who is most prepared to uphold Jamaica's status as a bankable nation.
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