THE EDITOR, Sir:
I WOULD like to commend Prime Minister P.J. Patterson and his Government for the PetroCaribe Agreement entered with Venezuela, and which will allow Jamaica to pay 60 per cent of its oil imports in cash, and the other 40 per cent to be paid as a long-term concessionary loan at one per cent interest rate.
The Jamaican economy is heavily dependent on imported fuel for its energy needs. Oil prices have risen significantly over the past 12 months and we do not know where they might settle in the next 12 months.
For this year, it is estimated Jamaica's oil import bill could be between US$1.2 billion and US$1.3 billion; and this would be almost the value of the gross foreign exchange earnings from the tourist sector.
The estimated annual 'savings' to the country's balance of payments from the PetroCaribe Agreement could be about $10 billion, based on current prices. And this is between 30 per cent to 40 per cent of the annual borrowing requirements of the Government from the expensive overseas capital market. The last amount of loans raised from this source was at an interest rate of some nine per cent. The size of Jamaica's public debt is now approaching J$800 billion. How much longer can the Government continue to service this large and growing debt stock, and especially the foreign currency-based debt, at these high interest rates. This is the big question!
The June 2005 International Monetary Fund (IMF) Interim Staff Report on Jamaica indicates that by the end of the Financial Year '05/'06, Jamaica's debt is projected to reach J$872 billion.
At the same time, the IMF Staff Report indicated that Jamaica's external commercial debt is projected to grow from J$203 billion in Financial Year '05/'06 to '08/'09. But, over the same period the concessional (cheaper) external debt is expected to fall from $97 billion in FY '05/'06 to J$64 billion by FY '08/'09.
Sir, against this background, I wish to make the following recommendation to the Prime Minister, and I am urging him to think about this very carefully. I recommend that the substantial cash windfall that will accrue from the PetroCaribe initiative should be used to pay down the country's expensive debt. If this is done, a substantial amount of resources from the annual budget would be freed up for expenditure in critical areas like education, health and rural road infrastructure, etc.
Mr. Prime Minister, I am imploring you to act on my recommendation in the interest of Jamaica.
I am, etc.,
RAY HADEED
8-10 Ashenheim Road
Kingston 11
