Finance Minister Dismisses Opposition’s Proposals to Address Debt Problem

Finance and Planning Minister, Dr. Omar Davies, has dismissed proposals put forward by Opposition Spokesperson on Finance, Audley Shaw to address the country’s debt problem, including accessing US$1 billion in low cost loans from a consortium comprising the World Bank, the Inter American Development Bank, and the Caribbean Development Bank, to replace expensive instruments.
He noted that while the country had previously received loans totaling US$325 million from these institutions, to assist with the healing of the financial sector, “lets get real, no such funds of that magnitude are available.”
“There is no crisis to justify such a block of funds being made available,” Dr. Davies added, as he closed the 2006/07 Budget Debate in Gordon House yesterday (May 10).
“I wish to assure the Honourable House that there could be no good reason why this administration would seek to avoid entering into an agreement, which would reduce debt servicing, but these notions by the Opposition Spokesman cannot face the reality test,” he stated.
In terms of the suggestion that the PetroCaribe fund could be used to retire expensive debt, the Minister said that while there were no disagreements with this suggestion, there were other areas in which the funds would be utilized. He noted further, that the PetroCaribe agreement limited the use of the facility for domestic debt. According to Dr. Davies, Mr. Shaw’s suggestion was not an original one, as in a submission to Cabinet, he had proffered that the government reduce its overall cost of borrowing by using the PetroCaribe funds to refinance existing expenses to the government’s domestic debt.
“Therefore, we have no disagreement on this use of the facility, but there are other areas, which will be eligible including investment in energy projects aimed at reducing Jamaica’s reliance on oil, upgrading the physical infrastructure in particular roads and bridges,” he said.
Responding to other proposals put forward by Mr. Shaw to reduce the debt, including borrowing against foreign currency inflows, Dr. Davies said there were “factors limiting this use” as the only major inflows controlled by the government were those from bauxite/alumina, and these were already being used as security for loans to facilitate government’s involvement in the industry.
“Obviously, there are significant inflows from tourism and remittances, but these inflows do not belong to the government and cannot be used to secure bonds,” the Finance and Planning Minister pointed out.
Turning to the signing of a successor Memorandum of Understanding (MoU) between the government and trade unions representing public sector workers, the Finance and Planning Minister expressed optimism that an agreement would be reached.
“I still expect that a new MoU will be signed with the workers. because they recognize that there are benefits above and beyond wages and salaries to be reaped from entering into an MoU with the government,” he asserted.