My fellow Jamaicans, good evening.
As we approach the final stages of our negotiations with the International Monetary Fund, this evening I wish to bring you up to date on the implications for all of us.
It was thirty-six years ago that Jamaica signed its first loan agreement with the IMF. Since then, we have negotiated other IMF agreements. On each occasion the signing has raised expectations of achieving sustained economic growth.
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As a country, we have not delivered on the expectations of growth and development. Every administration must share this responsibility.
In keeping with my administration’s commitment to the Jamaican people, we are now finalizing another agreement with the IMF. These negotiations have underscored the point that sustained growth will not materialize with Jamaica’s present level of debt.
The debt now stands at over 140 per cent of our Gross Domestic Product.
Ladies and gentlemen, as long as our debt as a percentage of our economy remains this high, our capacity for growth and development will be severely limited.
Consider the consequences:
With this debt, no administration will be able to provide the level of education and training required for Jamaica’s labour force to meet the needs of the job markets.
With this debt, we will not be able to achieve the levels of productivity that will make our economy more competitive;
With this debt, no administration will be able to provide and sustain the quality health care service we deserve;
With this debt, no administration will be able to modernize and maintain the country’s infrastructure at the appropriate levels to facilitate increased economic activity.
In short, if the debt is not reduced, Jamaica faces a dismal future.
My administration is determined to implement the sound management practices our economy requires; and we have already begun.
The centrepiece of the IMF agreement that we will sign is a commitment to significantly reduce the debt from the current level of over 140 per cent. This is critical to our Economic Reform Programme.
Bringing down the debt is a fundamental requirement to secure Jamaica’s future.
Bringing down the debt is fundamental to us moving forward to create jobs.
Bringing down the debt is also fundamental to enable us to provide the quality services and facilities that will meet the needs of our people.
It is therefore around this objective of reducing the debt that I will be mobilizing all Jamaicans.
To achieve this necessary level of debt reduction, greater levels of accountability and discipline are required. My administration is setting the example.
There is absolutely no room for non-performance. I insist on full accountability from everyone, every Department, every Ministry, every government entity, as we move confidently towards achieving our objectives.
Success can only come from a truly national effort; all of us working in harmony. We must not allow ourselves to be diverted by bickering. Every individual and every sector will need to make a contribution.
There are some very steep mountains to climb. For example:
We will redouble our efforts to collect the taxes that are due to the government from every business enterprise and every individual.
We will do all we can to provide more efficient, effective and considerate public service.
We will lead the national fight against corruption to ensure that the public receives value for every dollar spent.
My fellow Jamaicans, we can only come out of this crisis by taking extraordinary measures with the urgency that the situation demands.
In addition to actions already taken, there is one key action that we must now take before the signing of the IMF agreement.
The urgency of the situation demands a National Debt Exchange Offer, which will be launched on Tuesday morning. This National Debt Exchange offer is a critical component of both the IMF agreement and our Debt Reduction Programme. It can only succeed with the fullest cooperation of the broad financial sector and the support of the entire country.
I am therefore inviting every Jamaican to make this investment in our country’s future.
A Jamaican economy with a significantly reduced debt ratio would facilitate sizeable investments in building a stronger and more prosperous country. A Jamaican economy with a significantly reduced debt ratio would be a Jamaica in which there would be:
greater levels of sustained growth
more productive employment
real jobs, for more members of the labour force – and
improved quality of life for more families
Fellow Jamaicans, over time, we would make our country a better place to live, work, raise our families and do business. This is certainly a vision of the future worth striving and sacrificing for.
Join me Jamaica, in making this vision a reality. Join me on this journey that we are undertaking, to rescue our country from debt. Let us embark on the path of sustainable growth. We will be keeping you informed and presenting you with the facts.
It is to the credit of the Jamaican people that we have achieved excellence in so many fields. We are world leaders in so many areas. Jamaicans have done remarkably well, despite the fact that in relation to our economy we have been “down in the valley for a very long time”. We cannot afford to “get weary”. We have a real opportunity to climb out of the economic valley.
If we pull together and stay focused we can bring down the debt. We can fix the economy. We can inspire a new sense of hope and possibility in our country.
Let us work together.
On this note, I now ask our Minister of Finance to share with you the details of our economic programme.
ADDRESS TO THE NATION
By Dr. the Hon. Peter Phillips
Minister of Finance, Planning & the Public Service
Thank you Prime Minister.
My fellow Jamaicans, Good Evening.
The negotiations to secure a new Extended Fund Facility agreement with the IMF have been long and hard. And I want to thank the team that has fought hard on every issue to secure the best terms for Jamaica. The end of these negotiations is now in sight.
The Economic Reform Programme which we are undertaking and for which we are seeking support from the International Monetary Fund has as its major objective the reduction of our Public Debt in order to achieve sustained economic growth and job creation.
The numbers say it all: for every dollar of the budget that we spend approximately 55 cents goes to pay the debt, another 25 cents to pay wages which leaves just 20 cents to fix roads, maintain schools and hospitals and provide other critical services for the Jamaican people. It just isn’t enough. We can all attest to this fact from our own experiences.
I am satisfied that the agreement we are currently finalizing is the best we could negotiate for Jamaica. However, the implementation process will require a national effort and a contribution from everyone. Even as we try to minimise the impact of the sacrifice we will all be called upon to make we must seek to protect the poor and the vulnerable.
As the Prime Minister indicated the entire nation will be mobilised around the national objective of reducing Jamaica’s debt ratio from over 140% of GDP currently using the higher IMF numbers) to approximately 95% of GDP over the next 7 years.
Earlier in 2012 we began some of the necessary adjustments. We raised the primary surplus (which is the difference between revenues and non interest expenditure) from 3.1% to in excess of 5% which entailed a major revenue package and stringent expenditure controls.
We also advanced the tax reform initiative by reducing GCT rates, expanding the base, lowering other tax rates and raising the threshold on Personal Income tax.
We finalised the White Paper on tax reform, removed some 3000 posts from the public sector establishment and negotiated a wage restraint contract with public sector workers covering the 2010/2012 contract period.
We have also instituted a Central Treasury Management System which will be progressively rolled out to all Ministries, Departments and Agencies during the course of the year.
However, if we are to meet our objectives and secure the support of the IMF and the wider global financial community, including the multilateral lending agencies, the private financial entities and in the international investor community we must do more.
We must intensify the process of fiscal consolidation by further raising our primary surplus to 7.5% over the life of the Extended Fund Facility.
We have to intensify our tax reform efforts and in particular virtually eliminate discretionary waivers whilst strengthening the tax administration department. To secure greater levels of tax compliance we must also simplify and broaden the tax base.
Among the structural reforms being undertaken, Public Sector Transformation is an urgent priority in order to ensure greater efficiency and cost effectiveness in the public sector.
These reforms will be bolstered by an extensive legislative programme. The enactment of a new Omnibus Incentives Act and a new Charities Act along with amendments to the Revenue Administration Act will form part of this legislative agenda.
Given the critical importance of the IMF agreement to the Economic Reform Programme I would like to highlight the prior actions that the country will have to take in order to secure the support of the IMF Board.
First we will have to take concrete steps to reduce and virtually eliminate discretionary tax waivers. Later this week I will provide Parliament with the details.
We will also need to have a contract in place with public sector workers which will enable the achievement of a wage to GDP ratio of 9% by 2015/2016. We are in active discussion with the representatives of public sector workers to achieve this objective.
Another conditionality was the required passage of a Public Debt Management Act. This we completed.
Perhaps the most urgent of the conditionalities arising from the negotiations with the IMF is the requirement of a debt reduction programme.
Tomorrow a National Debt Exchange Offer will be launched with the support of leading private sector financial institutions. Let me assure bondholders that there will be no haircut on their principal investment. This offer which we urge bondholders to accept will make possible the reduction of our debt to GDP ratios by 8.5% or around $17b per year between now and 2020.
Essentially this programme exchanges higher interest debt for lower cost debt and will entail significant sacrifices from our financial institutions and the holders of our domestic bonds, it will be painful and difficult but we have no option.
Many of our bondholders with good reason will immediately respond to this announcement with a sense of disappointment as they recall that they made a similar sacrifice for Jamaica three years ago, when they were assured that their sacrifice would have put Jamaica on the path of growth and stability. I am only too aware of the fact that for them to be asked to make another sacrifice at this time is a burden that will be hard to bear.
Indeed not only the bondholders, but public sector workers who have endured successive bouts of wage restraint and ordinary members of the public who have had to face the harsh challenges of economic adjustment will certainly have these questions on their mind:
– What will be different this time around?
– What assurances can you give that the objectives will be achieved?
While no one except the Almighty can give absolute guarantees for the future, these are the facts to be taken into account:
First we shall be establishing by the end of March 2013 a coordinating and implementing unit in the Ministry of Finance, staffed with persons recruited from outside and within the public sector charged with nothing else than ensuring that everyone – all agencies and departments “get with the programme” and meet the timelines.
We will also be putting in place an Economic Programme Oversight Committee including Stakeholder representatives (such as the private sector and trade unions) and government officials to among other things monitor the compliance and progress of the Ministries, Departments and Agencies with regard to the implementation of the IMF agreement with full authority on their part to inform the public of their findings. This is an unprecedented step of public accountability and transparency.
The third factor to take into account is that the programme is designed to secure the major reforms “up front” either as “prior actions” or benchmarks for the first year. This in itself enhances the chances of success.
As we close, let me emphasize the fact that the ultimate objective of this entire exercise is to secure growth in incomes and employment for Jamaicans.
And there are in place solid and exciting prospects for growth.
Among these are:
A major expansion of the port facilities to exploit our geographic advantage in the post-PANAMAX context. This expansion will establish Jamaica as an integrated global logistics hub—including expanding port, cargo and maritime facilities and economic zones to take advantage of expected opportunities from the completed expansion of the Panama Canal.
The completion of the north south link for Highway 2000 represents an investment of US$610m over the next three years.
Additionally, CCCC, a Fortune 500 Company which is the parent company for China Harbour, has recently established a Global investment arm and is looking for investment opportunities and in this regard will be establishing an office in Kingston headed by a vice president.
The accelerated development of eight vertically integrated Agro Parks to stabilise the agricultural supply chain, increase competitive import substitution and activate unutilised rural land and labour offers tremendous opportunities. Producing more of our own food will both improve our national food security and significantly reduce our import bill.
Tourism continues to offer bright prospects. Riu Palace in Montego Bay leads a number of hotels in a major expansion programme of additional hotel rooms which are now at various stages of construction and completion.
The Factories Corporation of Jamaica will also be building 300,000 sq. ft. of space for Information Communication Technologies and logistics-related activities over the next three years. Funding is also available from the Development Bank of Jamaica for potential investors to finance/support the construction of ICT facilities.
This past year the DBJ advanced approximately US$20 million for ICT projects which represents more than 10,000 jobs.
We will continue to promote the opportunities for medium small and micro enterprises because when all is said and done the Jamaican people have time and time again demonstrated tremendous capacity to start and develop new businesses and to make our mark in establishing solid world class businesses.
Let us seize this opportunity presented in the midst of the difficult challenges created by our oversized public debt to reform our economy and set the foundations for a new and exciting phase in Jamaicans journey of independence and progress.
Let us seize the moment, not just for ourselves but for future generations.
[PRIME MINISTER’S CLOSING CALL TO ACTION]
Thank you Minister Phillips.
The key word is indeed, opportunity. There can be no doubt at this time that we are in the throes of a serious economic crisis. It is going to take hard work, discipline and sacrifice to overcome.
We now have a real opportunity to confront and conquer the root causes of our long-standing economic difficulties. Every single Jamaican is a stakeholder in this enterprise called our economy. We are all in this together and we need each other to overcome and succeed. Let us unite as one Jamaican family shaping the future together!!
Good night and may God bless you. May God bless Jamaica, land we love.