JIS News

Opposition Spokesman on Finance, Audley Shaw has proposed three “debt reduction solutions”, which he says are a necessary precondition to spurring investment and growth, and lowering the country’s debt burden.
Mr. Shaw, who was making his contribution to the 2006/07 Budget debate in Gordon House yesterday (May 2), noted that the recently signed PetroCaribe Agreement provided the country with the ability to finance a portion of its petroleum needs at preferential interest rates.
He proposed that the proceeds of the arrangement, which would yield some $18 billion by the end of this fiscal year, should be invested and used to retire expensive debt.
“The result would be a significant decrease in the debt stock and a further decrease in the amount of revenue dedicated to debt service, we estimate that in just three years this policy alone could lower debt to GDP ratio by eight per cent and interest expense by three per cent of revenue,” Mr. Shaw told the House.
“It is clear that any government serious about debt reduction should use PetroCaribe as a debt reduction tool,” he stated.
Meanwhile Mr. Shaw said the revenue flows collected each year “are an unused debt fighting tool”.
“If separated and securitized, bonds backed by these flows would receive interest rates significantly below the rates at which money is being borrowed, the proceeds of these bonds could then be used to repay more expensive debt and lower the annual interest burden,” Mr. Shaw argued.
He said the third resort was to borrow a “US$1 billion block of funds from a consortium of multilateral institutions and use this low interest cost funds to replace expensive instruments as they mature, thus reducing the demand for high cost instruments with the International Capital Markets”.
In the meantime Mr. Shaw said the country was also in need of a new business plan, which was export oriented and aimed at diversifying the economy, and developing a globally competitive service sector.
Furthermore he said there should be a revival plan for the agriculture sector and called for a clear strategy for rural development.
Turning to the tax system Mr. Shaw further proposed a removal of stamp duty, a reduction of transfer tax, the elimination of double taxation on non listed companies, the reduction of payroll taxes and the creation of incentives for higher education, PAYE workers and tax allowances for first time PAYE home owners.
In addition he said there was a need for a new energy policy and suggested that the Mirant Agreement under which the Jamaica Public Service Company was divested, be reviewed.