Newell, St Elizabeth - Jamaican Prime Minister Bruce Golding has blamed the borrowing strategies of the former People's National Party (PNP) Government and former Finance Minister Omar Davies for the pressure on the Jamaican dollar over recent weeks.

The Jamaican dollar has slipped from a relatively stable 72 to one US dollar in the main banking system just weeks ago to about 76/77 to one US dollar. Financial analysts say that while Jamaica's Net International Reserves (NIR) of US$1.82 billion provide a substantial cushion, there is likely to be further slippage approaching the commercially busy Christmas season.

Golding said the former Government's decision in the 1990s and early 2000s to borrow on the international commercial capital market rather than from cheaper multilateral lenders had made the current pressures from the global financial crisis greater than would otherwise have been the case.

The prime minister, who relied heavily on the vernacular and folk expression to make his case, was speaking to ruling Jamaica Labour Party (JLP) hard core supporters during Chris Tufton's South West St Elizabeth constituency conference at the Newell High School on Sunday night. The constituency conference precedes this weekend's annual party conference in Kingston - the second since the JLP's narrow victory in parliamentary elections 14 months ago after 18 years in Opposition.

"Let me tell you why our dollar is exposed today, when Labour Party was in power (1980-89), most of the money that we borrowed, we borrowed from multi-national organisations like the World Bank and the IDB (Inter-American Development Bank) and agencies like that because when you borrow from them you don't have to go into no commercial market with no bank with no paper, you borrow the money, and you have the paper, but what you borrow is between you and them, you not in any market," Golding said.

"In the 1990s and coming into the 2000s, Omar Davies and the PNP decide 'no man, we don't want no World Bank money, even though World Bank money is cheaper, we don't want no IDB money, even though IDB money is cheaper, we want to go on the commercial market, we want to go on the capital market because we can go and borrow money, now that we don't have no IMF (International Monetary Fund) anymore we can borrow money on the capital market'. But you have a little Jamaica saying that when fire deh a mus mus tail, him brain confuse, him tink is breeze blowing a him tail," the prime minister told the cheering crowd.

The PJ Patterson-led PNP Government ended a stressful, decades-old borrowing relationship with the IMF in the mid-1990s. The IMF's tough conditionalities as a lender of last resort for countries with balance of payments problems rendered it a virtual metaphor for hard times among Jamaicans and the ending of the borrowing relationship proved extremely popular.

Golding told supporters that "whereas in 1988/89 when we (Edward Seaga-led JLP Government of the 1980s) gave up office, 75 per cent of money we borrowed was from the multilateral organisations, only 25 per cent was from commercial banks. That situation has been completely reversed today where 75/80 per cent of the money that the PNP has borrowed is from commercial banks ."

Striving to explain the intricacies and effects of the debt instrument trade in an increasingly volatile financial climate, Golding said "when you borrow money from the commercial markets, you have a piece of paper and that paper will sell all five times and. you don't even know who you owe because the debt instrument that you issue is being sold and traded every day".

He explained that "these transactions start to go sour when people [who] need cash to cover their exposure sell Jamaican paper for whatever they can get. you have to start finding more foreign exchange to cover all the various margins."

He stressed that "when you see pressure coming on the dollar, is not because we short of foreign exchange, our reserves are strong, but it is because of what is happening in the global financial markets, because of our exposure now - an exposure that was crafted and strategically brought about by the PNP and by Omar Davies."

The international rating agency, Moody's Investors Service, recently placed Jamaica's debt rating "on review for downgrade" because it said the ongoing financial crisis was exerting significant pressures and could adversely affect credit worthiness.

Moody's said in part that "the structure of Jamaica's public debt, with over 50 per cent exposed to foreign currency and interest rate movements, makes the situation particularly vulnerable."

Similarly pessimistic analyses have come from another rating agency, Standard & Poor's, and the World Bank.

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