Shaw Puts Forward Proposals to Reduce Debt Burden

Opposition Spokesman on Finance, Audley Shaw on (April 17) suggested a number of measures to reduce the debt burden, including placing constitutional limits on annual borrowing.
“While caps must have some flexibility and are not capable of totally solving the problem, they will serve as an important benchmark and impose an additional layer of oversight into the borrowing process,” Mr. Shaw said in his contribution to the 2007/08 Budget Debate in Gordon House.
In addition, Mr. Shaw submitted, lending from multi-lateral institutions should be on Jamaica’s terms. “Assuming (that the) pre-conditions are consistent with our overall economic policy, we propose re-examining the possibility of borrowing from a consortium of multilaterals at rates significantly below what Jamaica can access in the capital markets,” he posited.
He noted that these funds could be used to refinance expensive instruments and further lower borrowing costs, as well as finance special initiatives such as the Education Transformation Programme.
The Opposition Spokesman also proposed a comprehensive audit of valuable Government assets by an independent body, with a view to using some of these assets as sources of budgetary support. “Considerable budgetary support can be generated by strategically eliminating loss-making entities and divesting profitable entities via privatization or public equity offering on the Jamaica Stock Exchange,” he said.
In addition, Mr. Shaw said, the proceeds of the PetroCaribe agreement could be used to pay off expensive domestic debt, arguing that this move alone could reduce debt to Gross Domestic Product (GDP) ratio by eight per cent in three years. He further called for steps to be taken to have the Financial Secretary present to Parliament, monthly expenditure reports on activities under the recently implemented PetroCaribe Fund.
Foreign currency flows, he noted further, could be used as a debt-fighting tool. “If separated and securitized, bonds backed by these flows would receive interest rates significantly below Jamaica’s global and Eurobonds. The proceeds of these bonds could then be used to repay more expensive debt and lower annual interest costs,” he stated, noting that similar structures have been successfully implemented in Russia, Mexico and Venezuela.
Mr. Shaw said the issuance of Diaspora bonds should also be explored as the Diaspora was “an immense financial resource to the development of Jamaica”. Already contributing through remittances, he pointed out, the Jamaican Diaspora could be tapped into as a debt-fighting tool.
“Offering the Diaspora the ability to invest in bonds whose proceeds could be used to pay down more expensive debt, would provide a market-based solution to the debt problem, and at the same time, provide a formal means to strengthen the financial ties between the Diaspora and communities in Jamaica,” he outlined.
The Opposition Spokesman further suggested that a partnership be secured with the private sector on debt interest rate reduction. “The private sector, including financial institutions, has a vested interest in working with the government to resolve the debt burden,” he stated.