Governor of the Bank of Jamaica (BOJ) Brian Wynter has said that Government’s debt management programme will be a critical first step to repaying the US$1.25 billion loan agreement that the country is expected to sign with the International Monetary Fund (IMF).

“That goes to the core of what sustainable fiscal policy is all about — you can only pay back debt out of future income and so you have to have a debt that’s consistent with what you can do,” said Wynter, while making his keynote address at the Jamaica Stock Exchange (JSE) Fifth Regional Investments and Capital Markets Conference at the Jamaica Pegasus in Kingston.

“I think the fiscal responsibility framework is part of the mechanism that we need in order to help us to make sure that spending is in accordance with the programme that we agreed to,” he declared.

Wynter’s comments were made against the background of last week’s launch of the Jamaica Debt Exchange (JDX) programme which is expected to save the country $40 billion in interest expenditure on domestic debt over the next financial year. Under the programme the holders of some $700 billion worth of domestic government bonds which carry varying interest rates ranging up to 28 per cent will exchange them for new bonds that will carry much lower interest rates and extended maturities.

Prime Minister Bruce Golding, in a broadcast to the nation last week, said that the initiative is “a critical part of an economic programme designed to steer the economy out of the recession and into a new era of opportunity for sustained growth”.

Meanwhile, in response to questions about his projection that inflation will trend downwards although commodity prices are rising on the world market, Wynter declared that global commodity prices had little to do with the inflation rate. He supported his assessment by stating that the level of inflation in developed countries, which are faced with the same commodity price rises, is not as high as in Jamaica.

“The rise in prices of these commodities on an aggregrate basis is not what is causing our inflation,” said Wynter, adding that “The question we should ask is why should it be as high at seven per cent while our trading partners have two.”

Wynter, who succeeded Derrick Latibeaudiere last month, has projected inflation for the next financial year to be in the nine to 11 per cent range. He said that all indications are that despite a contracting economy, inflation is trending downwards and is expected to continue with the injection of funds from the IMF to boost the balance of payments.