THE government recently passed legislation for a tighter, better management of public debt, among other things. One of the most important aspects of debt management is setting a ceiling for debt, but I did not see anything definitive about this in the legislation. In Jamaica, debt ceilings have been set and broken frequently, and as a result there is no significant reduction of debt.
We often practise the distorted art of breaking the debt ceiling by borrowing from Peter to pay Paul, or to strengthen the net international reserves. One of the ways of beating the debt trap is to stick to the ceiling for at least five years, unless we are borrowing for national emergencies and economic development which generate income to meet debt.
The fact is we are borrowing and using other countries' money to remain stable. It is full time that Jamaica relied more on its own resources brought about by economic development, reduced corruption and waste in government, instead of borrowing and breaking debt ceilings. In the mixture we may have to raise taxes to help bridge the gap, but it is the only way out of the debt trap. The crisis now requires bold steps by the government. Because of political disfavour, the Jamaican government has always been reluctant to take bold steps and that is one of the reasons for the economy becoming economically impotent over the years. We cannot continue to sink in the debt trap. According to a report in the December 9 edition of the Sunday Gleaner, for the period January to September 2012 Jamaica incurred an estimated $81.9 billion of additional debt. At the end of September 2012, the nation's debt had grown this year by five per cent to $1.7 trillion!
There are some good moves in the debt management legislation. For example, there is the Medium-Term Public Debt Management Strategy (MTPDMS) which will take into account, among other things, the Macro-Economic Environment, future borrowing by the government and market conditions.
Another progressive move is the creation of a Public Debt Management Committee to:
* Monitor the implementations of the legislation in general and the MTPDMS in particular
* Assess the policies, strategies and operations of debt management of contingent liabilities with a view to ensuring consistency with the legislation and the macro-economic monetary and fiscal policies of the government.
* Performing such functions as may be assigned to it by the minister of finance.
The functions of this committee are most important and they should not be "yes persons" to the minister. Committees' reports are influenced by ministers too often in this country.
There is also the Public Debt Financing Committee which, in relation to the management of debt, shall be to make recommendations to the financial secretary in respect of debt instruments, review other debt management-related transactions such as derivatives, including currency and interest rate swaps and debt exchanges, review and recommend the monthly schedule of market instruments and review the evaluations of funding requests by specified public bodies.
The committee will also review and monitor issues relating to the cost or pricing of contingent liabilities, determine the monthly financing programme, provide periodic reports to facilitate the work of the Public Debt Committee and perform such other functions as may be assigned to it by the financial secretary. It is expected that the debt management unit of the Ministry of Finance, which has been doing a fine job under difficult circumstances, will be incorporated into the committee.
Under the legislation, the minister of finance may borrow money for the following purpose only to: finance the fiscal deficit, refinance any maturing or outstanding public debt, finance investment projects approved by the House of Representatives, finance payment of guarantees called, facilitate cash management operations, finance activities required in the interest of national security, and reduce or eliminate the effect of a period of public disaster or a period of public emergency as defined in section 20 of the Constitution of Jamaica.
The minister may also borrow to replenish international reserves, on-lend from time to time with the approval of the House of Representatives to public bodies and such other bodies as the House may approve, and such other grounds as the minister may, by order subject to affirmative resolution, specify to be an exception.
Having regard to what happened in the past, there ought to be more restrictions on the minister's authority to borrow without the approval of the House.
Hall of Fame
On a personal note, I wish to thank the Press Association of Jamaica for inducting me into its Hall of Fame. It has been a long journey in a noble profession covering 65 years - rising from a cub reporter to become a member of the Hall of Fame.