Government’s commitment to sustained interest rate reductions forms a key part of the medium term programme, which a technical team, led by Bank of Jamaica (BoJ) Governor, Hon. Derick Latibeaudiere, will present to the International Monetary Fund (IMF), at today’s (September 22), scheduled meeting in Washington, D.C., United States.
This was stated by Minister of Finance and the Public Service, Hon. Audley Shaw, at the Private Sector Organisation of Jamaica (PSOJ) Chairman Club’s Forum, held at the Jamaica Pegasus Hotel in Kingston, today (September 22).
“The most important part of any (country’s) debt reduction strategy has to be a policy of sustained low interest rates. We cannot get investments and wheels of industry turning again, unless we do something about interest rates. We have to get that buy-in and we need to work together on that,” Mr. Shaw stressed.
Finance and the Public Service Minister, Hon. Audley Shaw (centre), converses with Private Sector Organisation of Jamaica (PSOJ) President, Joseph M. Matalon (left), and Vice President,. Earl Jarrett, during the PSOJ Chairman Club’s Forum, at the Jamaica Pegasus Hotel, in Kingston, today (September 22), at which he was guest speaker.
Noting that only about 60 per cent of the Budget could be financed from revenue income, the Finance Minister argued that he was unable to “turn things around overnight,” within the context of the global recession and declining economy. This situation, he added, is worsened by continued private sector demand for high interest rates, “when there is no objective basis on which that should be so.”
“It’s crunch time, and part of (that) crunch is that we must get real; we must join the rest of the world in understanding that there is a thing called single digit interest rates. In the medium term, we mustn’t be talking about 16 per cent, 18 per cent or 14 per cent. We must begin to talk about nine per cent, eight per cent, seven per cent, six per cent, and five per cent,” he asserted.
Mr. Shaw said the administration, through the Ministry, has been “leading the way” in this regard, citing the over US$600 million raised from multi-lateral institutions during 2008, at average interest rates ranging between three and five per cent.
Finance and the Public Service Minister, Hon. Audley Shaw (right), in discussion with Private Sector Organisation of Jamaica (PSOJ) President, . Joseph M. Matalon, during the PSOJ Chairman Club’s Forum, at the Jamaica Pegasus Hotel, in Kingston, today (September 22), at which he was guest speaker.
“Not only should we raise money cheaply from the multi-lateral institutions, I’m also saying we must get cheaper money from the private sector for public sector investments. So, last week in Parliament when we approved a loan guarantee by the Government, for the development of the Trelawny cruise ship pier, being co-sponsored by the Royal Caribbean Cruise Line, the interest rate there from the HSBC Bank is 2.25 per cent,” the Minister said.
“We have secured a commitment from the Government of China, through its Export-Import Bank, to undertake a major road programme over the next four to five years. What is the interest rate there?… three per cent. I’m suggesting, therefore, that as a Government, we are doing the things that are necessary to send the right signals that single digit interest rates are real,” he added.
The Minister emphasised that the administration and, by extension, Jamaica, would not be facilitating the perpetuation of any programme of “transferring wealth from the rich to the poor.”
“Getting cheap money one way and passing expensive money out another way to keep financing my budget is unsustainable, intolerable, and there is no need for us to do it,” Mr. Shaw contended.