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Minister of Finance and the Public Service, Hon. Audley Shaw says that progressive reduction in public sector demand will eliminate a significant portion of the current premium in the country’s interest rates that is related to macro economic uncertainty and government defaulting on its loans.
“In short, the productive sectors of the economy will be able to finance working capital and longer term investment at more competitive interest rates,” he told a financial literacy forum hosted by the Financial Services Commission (FSC) at the Jamaica Pegasus Hotel this morning (Aug. 18).
The lowering of public sector costs is part of the Government’s overall fiscal programme to keep a tight reign on the economy, as it looks toward the International Monetary Fund (IMF) third quarter performance test at the end of September. An IMF team is now in the island conducting its review for the second quarter, which ended in June. “I am confident about a positive outcome for September as well,” the Finance Minister remarked.
He said that the Government has also been sourcing multi-lateral funding at very low rates. “The World Bank loaned us US$200 million at 0.63 per cent interest rate.the IDB has loaned us US$430 million since the start of this year at interest rates of between 1.2 per cent, and 1.5 per cent,” he outlined.
Underpinning the decline in interest rates on borrowings, Mr. Shaw said, is a low inflation regime that will target single digits. “In this regard, the annual rate of consumer price increases is expected to fall to the six to seven per cent range over the next four years – in fact we are pretty close to targeting seven per cent for this fiscal year,” he noted.
Mr. Shaw said this low inflationary regime will facilitate longer term planning by the productive sector, and temper the rate at which labour and other input costs will rise, thereby enhancing the competitiveness of the productive sector.
He pointed out that given the low rate environment that is being pursued, and following the successful completion of the Jamaica Debt Exchange (JDX), as well as the signing of the IMF standby agreement, the maintenance of low investment friendly inflation is a necessity, if financial planning is to bear any real fruit.
“Low and stable inflation will engender more predictable returns on investment, and savings will be able to maintain their purchasing power, businesses will be able to plan with greater certainty, thus minimising wild fluctuation in consumer prices,” he stated.
The FSC organised the forum in collaboration with the Caribbean Regional Technical Assistance Centre, with a view to engaging financial education stakeholders in dialogue, particularly in building consensus among public sector bodies, non-governmental organisations, learning institutions, financial service providers, and financial literacy practitioners.
The Commission is spearheading the development of strategies towards implementing a National Financial Literacy Programme (NFLP) to empower Jamaicans with the financial knowledge necessary to create household budgets, initiate savings plans, properly manage debt, and make sound investment decisions.

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