Domestic Bond Offer Reduction not on – Dr. Davies

Minister of Finance and Planning, Dr. Omar Davies has described the Opposition Leader’s suggestion that a five per cent reduction on government domestic bond offers could yield $22 billion in one year, thereby removing the fiscal deficit, as a proposal that was “simply not feasible”.

Dr. Davies was closing the 2004/05 Budget Debate in Gordon House on Wednesday (April 28). “Furthermore, it would be unwise for any Government to proceed to commit itself to additional expenditure to be funded on possible savings from interest rates,” he stated.

“What happens if, per chance, due to shocks, domestic or external, interest rates move in the opposite direction? How would we then compensate for expenditure already undertaken?” the Finance Minister asked.

He pointed out that government had projected interest expenditure assuming an aggressive reduction in interest rates. This interest rate assumption did not stand in isolation, he added further, and was consistent with all the other aspects of the macro-economic programme.

In response to the Opposition Spokesman on Finance’s proposal for further divestment activities, which he said would yield an additional $1 billion, Dr. Davies pointed out that during the last fiscal year Government divested various assets amounting to $6.9 billion. This included the sale of Life of Jamaica and RJR shares, as well as receipts from the sale of non-performing loans.

“The truth is that this amount was far in excess of that which had been projected,” he said. Dr Davies further noted that the projected revenue from similar divestments for 2004/05 was $1.9 billion.