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IMF Negotiating Time Nothing to do with Competence - PM Golding
Prime Minister, the Hon. Bruce Golding, says the length of time that the negotiations with the International Monetary Fund (IMF) has taken, has nothing to do with the competence of the negotiating team.
"The fact is that the negotiating team is largely the same team that has been interacting with the IMF over many years," he said, while addressing a special sitting of the House of Representatives on December 17.
Mr. Golding stressed that the length of the discussions was a direct result of the perilous state of the country's finances and the severe weaknesses in the economy, which have been severely aggravated by the global crisis. "We have found ourselves in a position where our options are extremely limited, the room to manoeuvre almost non-existent," he explained.
Pointing out that the global crisis is the worst the world has seen in some 80 years, he noted that it had ravaged advanced developed countries with strong economies. "They have seen their economies plunge into negative growth, their employment rate achieve levels they have not seen in decades, and they have all seen soaring fiscal deficits," he said.
Developing countries, particularly those that were fast-growing, such as Mexico, Costa Rica and the Dominican Republic, were "virtually stopped in their tracks," Mr. Golding said, as some 46 such countries had to secure agreements with the IMF. He said Jamaica was not in the category of fast-growing countries as there has been a long period of slow anaemic growth, which saw less than 3 per cent growth in any one year, for 20 years.
"Our expenditure has consistently exceeded our revenue. By September 2007 we had accumulated deficits of more than $250 billion. When you accumulate deficit year after year, all you're doing is piling it upon your debt and, therefore, you're impacting your budget, in terms of how much money has to be set aside to service this growing debt," the Prime Minister outlined.
He pointed out that this accumulation of deficit has continued, as between September 2007 and March 2008, the country accumulated a deficit of $22.5 billion, and for 2008 to 2009 there was an accumulated deficit of $43.2 billion. "Up to the end of October 2009, because of the significant problems in the economy, the deficit so far has been $75.9 billion. In seven of the last 10 years our debt service cost has exceeded our revenue," he told the House.
"The chickens have come home to roost. The days of recklessness are over. Is the path going forward going to be easy, is it going to be painless? No. We have had to introduce a tax package. I want to acknowledge the pain and hardship that this is going to impose, particularly at a time when people are reeling from the effects of the global recession," Mr. Golding said.
He emphasised that the country cannot continue to borrow, as not only would this further cripple the ability to function as a government and as a country, but the funds are simply not available. "We just cannot spend, every year, more than our revenue," he said.
The Prime Minister explained that apart from cutting expenditure, there is no alternative to raising new taxes, "not unless we are going to start identify which schools we are going to shut down, which hospitals and clinics we are going to close, which social safety net programme we are going to shut down. We are faced with a situation where there is no alternative."
Mr. Golding pointed out that Jamaica is not the only country that has been forced to raise new taxes, highlighting that Spain recently increased its consumption tax from 16 to 18 per cent and had also proposed an increased tax on savings income.
He noted also that the United Kingdom reduced its consumption tax from 17.5 per cent to 15 per cent when the recession peaked, and will be putting it back to 17.5 per cent as of January 1. The top income tax rate has also been increased to 50 per cent.
The Prime Minister said other countries, including Mexico, Argentina, and Grenada have increased consumption taxes on certain items, and that Trinidad is also holding discussions in a bid to increase property taxes.
http://www.jis.gov.jm/officePM/html/...PM_GOLDING.asp
Prime Minister, the Hon. Bruce Golding, says the length of time that the negotiations with the International Monetary Fund (IMF) has taken, has nothing to do with the competence of the negotiating team.
"The fact is that the negotiating team is largely the same team that has been interacting with the IMF over many years," he said, while addressing a special sitting of the House of Representatives on December 17.
Mr. Golding stressed that the length of the discussions was a direct result of the perilous state of the country's finances and the severe weaknesses in the economy, which have been severely aggravated by the global crisis. "We have found ourselves in a position where our options are extremely limited, the room to manoeuvre almost non-existent," he explained.
Pointing out that the global crisis is the worst the world has seen in some 80 years, he noted that it had ravaged advanced developed countries with strong economies. "They have seen their economies plunge into negative growth, their employment rate achieve levels they have not seen in decades, and they have all seen soaring fiscal deficits," he said.
Developing countries, particularly those that were fast-growing, such as Mexico, Costa Rica and the Dominican Republic, were "virtually stopped in their tracks," Mr. Golding said, as some 46 such countries had to secure agreements with the IMF. He said Jamaica was not in the category of fast-growing countries as there has been a long period of slow anaemic growth, which saw less than 3 per cent growth in any one year, for 20 years.
"Our expenditure has consistently exceeded our revenue. By September 2007 we had accumulated deficits of more than $250 billion. When you accumulate deficit year after year, all you're doing is piling it upon your debt and, therefore, you're impacting your budget, in terms of how much money has to be set aside to service this growing debt," the Prime Minister outlined.
He pointed out that this accumulation of deficit has continued, as between September 2007 and March 2008, the country accumulated a deficit of $22.5 billion, and for 2008 to 2009 there was an accumulated deficit of $43.2 billion. "Up to the end of October 2009, because of the significant problems in the economy, the deficit so far has been $75.9 billion. In seven of the last 10 years our debt service cost has exceeded our revenue," he told the House.
"The chickens have come home to roost. The days of recklessness are over. Is the path going forward going to be easy, is it going to be painless? No. We have had to introduce a tax package. I want to acknowledge the pain and hardship that this is going to impose, particularly at a time when people are reeling from the effects of the global recession," Mr. Golding said.
He emphasised that the country cannot continue to borrow, as not only would this further cripple the ability to function as a government and as a country, but the funds are simply not available. "We just cannot spend, every year, more than our revenue," he said.
The Prime Minister explained that apart from cutting expenditure, there is no alternative to raising new taxes, "not unless we are going to start identify which schools we are going to shut down, which hospitals and clinics we are going to close, which social safety net programme we are going to shut down. We are faced with a situation where there is no alternative."
Mr. Golding pointed out that Jamaica is not the only country that has been forced to raise new taxes, highlighting that Spain recently increased its consumption tax from 16 to 18 per cent and had also proposed an increased tax on savings income.
He noted also that the United Kingdom reduced its consumption tax from 17.5 per cent to 15 per cent when the recession peaked, and will be putting it back to 17.5 per cent as of January 1. The top income tax rate has also been increased to 50 per cent.
The Prime Minister said other countries, including Mexico, Argentina, and Grenada have increased consumption taxes on certain items, and that Trinidad is also holding discussions in a bid to increase property taxes.
http://www.jis.gov.jm/officePM/html/...PM_GOLDING.asp