• Shaw blasts PNP for financial sector meltdown • Phillips says future PNP gov’t would manage fiscal accounts
Friday, December 16, 2011
FINANCE Minister Audley Shaw last night poured cold water on a claim by Dr Peter Phillips that the high interest rate regime that led to the collapse of thousands of local businesses in the 1990s was market-driven and not a policy implemented by the then People’s National Party (PNP) Government.
Shaw also insisted that the PNP could not be trusted to keep interest rates down as he responded to a commitment by Phillips that a future government formed by the PNP would ensure the tightest possible management of the country’s fiscal accounts.
Both men were fielding questions from journalists in the second of three planned political debates leading up to the December 29 general election.
Phillips, in response to a question as to whether the PNP, if re-elected to office, would ensure that the country would not see a repeat of the 1990s meltdown of the financial sector, said various countries, from time to time experience economic and banking crises.
“It is true that the failure of the banking system in the mid-90s cost the country tremendously,” Phillips said. “It is also true that the Government at the time rescued the savings of all Jamaicans, rescued the pensioners and everyone who had investment in the system. There are those who, despite the best efforts of the Government and themselves, were not able to come out of that system with their businesses intact. It was very much regretted, but what we have put in place is strengthened financial regulations, in the deposit insurance scheme that will help to guarantee that such a crisis of those proportions will not occur again.”
He also sought to brush off an earlier suggestion from Shaw by stating that the PNP administration of the 1990s did not pursue a high interest rate policy, as the interest rates, he said, were market-driven.
However, Shaw, in response, said: “Call it what you want to, call it; policy or no policy, interest rates averaged 53 per cent during the 1990s. Penalties on overdraft went to as high as 120 per cent, and in consequence the productive sectors collapsed, the customers of the banks collapsed, and then the banks, all 41 financial institutions, collapsed; 40,000 businesses collapsed. It was a gross dereliction of governmental responsibility on the part of the entire Cabinet and then you had crime that quadrupled during the period as well.”
It was at this point that Phillips committed to tight fiscal management when he was asked whether he was saying categorically that interest rates would not be erratic under a future PNP Government.
But Shaw, expressing disbelief, brought the PNP’s credibility to the fore and described Phillips as the master of deferred financing as he insisted that the Opposition party could not be trusted to keep interest rates down.
Shaw said that when Phillips served as minister in three separate ministries during the 18 years of the previous Government he utilised deferred financing.
“He had the programme at health, deferred financing at national security and he was the master of deferred financing, off budget financing at the Ministry of Transport and Works,” said Shaw.
The finance minister pointed to the Hope Road project, saying that it was financed at an interest rate of 24 per cent and was placed on the budget two years after completion.
The first debate was staged last Saturday between young members of both political parties.
The final debate will be held next Tuesday between Prime Minister Andrew Holness and Opposition Leader Portia Simpson Miller.
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