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The cold fact, as revealed by the numbers, is that the Jamaican Government cannot afford to pay its way. In the last fiscal year, it spent $74 billion more than it earned.
Approximately three-quarters of all the money it raised in taxes and grants went to servicing its debt. The residual 25 per cent, the $84 billion available for discretionary spending, was insufficient to pay government salaries, much less the other operating expenses of the country.
The Government closed the gap by borrowing, as administrations have done consistently for years and continue to do. The upshot is a debt of $1.6 trillion, or around 130 per cent, of gross domestic product. And this amount excludes hundreds of millions of dollars of debt that does not make it on to the books.
Like a bank's customer with a near maxed-out credit card, such an existence is unsustainable. Sooner or later, the credit is cut off. Or, the borrower pays a borrowing premium for his debt. The International Monetary Fund (IMF) has done the former with Jamaica, and Standard & Poor's, the rating agency, threatened the latter with its warning of a downgrade.
When countries find themselves in such situations, they have to adjust, which is what Ireland, Greece and Italy are being forced to do. Jamaica has no option but to follow.
This usually demands cutting spending to suit available resources and/or earning more, by collecting more or increasing taxes and/or contracting public expenditure. For years, Jamaica has waffled on meaningful tax reforms. It no longer can. More people have to pay their fair share rather the handful, as is currently the case.
But tax reform and spending cuts are difficult. Voters and special interests will resist. They will be unpopular and will thus require strong leadership from whoever heads our Government. The question is whether Mr Andrew Holness or Mrs Portia Simpson Miller
Approximately three-quarters of all the money it raised in taxes and grants went to servicing its debt. The residual 25 per cent, the $84 billion available for discretionary spending, was insufficient to pay government salaries, much less the other operating expenses of the country.
The Government closed the gap by borrowing, as administrations have done consistently for years and continue to do. The upshot is a debt of $1.6 trillion, or around 130 per cent, of gross domestic product. And this amount excludes hundreds of millions of dollars of debt that does not make it on to the books.
Like a bank's customer with a near maxed-out credit card, such an existence is unsustainable. Sooner or later, the credit is cut off. Or, the borrower pays a borrowing premium for his debt. The International Monetary Fund (IMF) has done the former with Jamaica, and Standard & Poor's, the rating agency, threatened the latter with its warning of a downgrade.
When countries find themselves in such situations, they have to adjust, which is what Ireland, Greece and Italy are being forced to do. Jamaica has no option but to follow.
This usually demands cutting spending to suit available resources and/or earning more, by collecting more or increasing taxes and/or contracting public expenditure. For years, Jamaica has waffled on meaningful tax reforms. It no longer can. More people have to pay their fair share rather the handful, as is currently the case.
But tax reform and spending cuts are difficult. Voters and special interests will resist. They will be unpopular and will thus require strong leadership from whoever heads our Government. The question is whether Mr Andrew Holness or Mrs Portia Simpson Miller
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