JIS News

KINGSTON — Minister of Finance and the Public Service, Hon. Audley Shaw, has attributed the $597 billion increase in the country's debt stock between September, 2007 and March, 2011, to pre-2007 residual factors.

This includes $117 billion from the effects of exchange rate movement and consumer price index indexation which, he says, is significantly related to the debt structure the Government inherited in 2007.

Mr. Shaw, who outlined the figures as he closed the 2011/2012 Budget Debate in the House of Representatives on Wednesday, said that US$400 ($34 billion) was transitory, representing the pre-funding of a bond payment.

“Importantly it replaces a high cost instrument that was at 11.45 per cent, replacing it with an instrument that is 7.9 per cent,” he noted.

Some $44.8 billion was for the external guarantees secured to finance projects, including airport reform and the Falmouth Cruise Ship Pier. Additionally, he told the House, FINSAC cost the Government over $140 billion.

“We continue to fund interest in the 2010/2011 budget and also in the present budget.  This had to do with the securities to the Bank of Jamaica for capitalization of interest on the Bank’s holdings of former FINSAC bonds,” he explained.

Following the financial sector meltdown of the 1990s, the Financial Sector Adjustment Company (FINSAC) was established, by the then Government, to resolve the problems of solvency and liquidity being experienced by the sector.

He pointed out that $38 billion represented drawdown on loans contracted before September 2011; $73 billion represented new external project loans; $260 billion represented net new loans contracted for budget financing; and $44 billion represented deferred financing debt, relating to Air Jamaica and the Sugar Company of Jamaica.

Mr. Shaw also emphasized that in addition to these debts, another $25 billion, representing Air Jamaica, SCJ and Clarendon Alumina Partners (CAP) debt, will be “brought to book” during the financial year.

“In regards to CAP, total debt incurred is now US$440 million, which includes a US$185 million subsidy for the forward sale agreement with Glencore,” he stated.

He said that the liability could cost Jamaica over $100 million more up to the end of the contract, which is why the Government is pursuing the divestment of CAP.



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