Events in Tivoli with the continuing fight against crime have distracted the nation from the significant gains being made in the local economy. Of immediate significance is the 4.3 per cent increase of the local dollar against its US counterpart since March. We have become used to a depreciating dollar and its attendant risks for runaway inflation. It is therefore heartening when the local dollar moves in the opposite direction and does so consistently over three months.

The small incremental gains in the economy must not be trivialised. They signal the beginning of what can be a robust economy if we are prepared to see it through. It is heartening that with the conclusion of the Jamaica Debt Exchange (which would not have happened without the cooperation of the private sector players), members of the private sector continue to give their qualified support of the government’s efforts. This is so despite the biased analysis that often comes from people who should know better and who stifle, or otherwise squander their intellectual integrity often to score political points. One has no problems with critical assessments being done of any government programme. Any self-respecting government can only benefit from balanced, cogent, and incisive criticism. It is not helpful, however, when these criticisms are politically laden and in some cases carry the whiff of envy of what others have been able to do.

The long-term viability of the economy cannot be sustained without serious attempts being made to stimulate and build aggregate demand. Of crucial importance to this effort is the involvement of the small business sector in creating new businesses and expanding existing ones. The threat of a double-dip recession in the United States is looming because the Obama administration has not been able to build aggregate demand to the extent that a robust job growth can be stimulated as businesses expand. It is amazing that the administration has not moved with more zeal in ensuring that small and medium-sized businesses get the support they need to survive and grow. There is still the nagging problem of the banks not lending, or in cases where they are, horrendous and unacceptable conditions are applied that make the effort to borrow not worth it.

In our local situation, the banks are yet to be fully awakened to their role in building and maintaining aggregate demand in our local economy. Despite the “grudging” assistance being given by NCB and Scotiabank to some areas of the economy, interest rates remain ridiculously high. If interest rates are generally high in an economy, people are not easily motivated to borrow even when lower rates are offered for special sectors or tasks. This is perhaps why the two major banks have not seen people breaking down their doors to borrow the low-interest money they are offering, especially to the agricultural sector. The other problem, of course, is that the Finsac “duppy” still haunts a lot of would-be and existing entrepreneurs. Many will have to be convinced that the country is really into a low-interest rate model to be encouraged to take the risks that are necessary. And the banks will make greater demands to ensure that money lent will be repaid. Already we have seen the number of non-performing loans held by the major banks increasing over the last year.

But despite these challenges, ways have to be found to reduce interest rates to more acceptable levels. The banks have taken a hit with the JDX programme, but so has everybody else. The major banks will not fail anytime soon. They are still making a hefty return on their investments. All that the country is asking for is that they become more creative in their lending practices. Now that they do not have the cushion of high government yields, they must become increasingly creative. After years of financial obesity a little slimming down will help.

stead6655@aol.com

www.drraulston.com