Dr Davies' monumental achievement
Rev Raulston Nembhard Contributor stead6655@aol.com
Saturday, April 28, 2007
Dr Omar Davies exuded a great deal of confidence as he opened the budget debate for the 2007-2008 financial year.
The defining feature of the presentation resided more in what was not said than what was said. In light of the economic problems that face Jamaica, the presentation indulged in generalisations without specific reference to a number of key economic indicators that are of concern to the Jamaican people.
For example, take the matter of debt strategy. It does not seem that the government fully appreciates the implications of the debt crisis that faces the country. The fact that they do not see the problem as a crisis spells volumes in this regard.
We are fast approaching the $1-trillion mark. Some would argue that we have exceeded this mark if you take into account deferred financing and other high ticket items such as Air Jamaica. It is obvious that the nation is not being told the truth about the level of indebtedness that we face.Take the matter of the NIR, for example. We are not told that the big build-up about which the government boasts is the consequence of loan receipts and not income earned from the productive capacity of the Jamaican people. There is nothing much to gloat about except that this money is available to deal with a number of months of imports but the debt that caused it has to be repaid. And contrary to what the minister would have us believe, that debt is growing exponentially.
The greatest failure of Mr Davies' presentation was the absence of any real strategy to deal with the debt. It does not take a PhD in economics to know that you cannot borrow your way into prosperity. No country can become prosperous by forever borrowing money to deal with recurrent expenditure such as paying government salaries.
It is clear that such expenditures should be met from revenue collection or even taxation as a last resort. But the minister has found it easier to borrow without recognising the real implications of this for the long-term health of the country.
The answer to the debt crisis is to make the economy grow. But the economy has not grown significantly over the past 18 years. We have registered net negative growth over the years. The minister's own growth targets have been missed repeatedly, even when other economies in the Caribbean have registered impressive growth rates. We have to earn our way out of our difficulties, not borrow our way out. The high debt is an index of the failure of the government over its long haul in power to improve the economy effectively.
There are many factors that go into improving an economy and not least among these is the psychology of trust and confidence which are not in ample supply in the productive sector. The government talks about the recovery of confidence while important operatives in the productive sector such as Mr Gordon "Butch" Stewart lament the lack of collaboration between the private and public sectors and the general malaise in the economy. It is this kind of collaboration or dialogue as Mr Stewart calls it that will lead to the generation of jobs.
The truth is that the economy is not as healthy as the minister would have us believe. Macroeconomic indicators such as the declining interest rates may be moving in the right direction - for now. We will soon see how this will impact on the exchange rate. It is true that hotels are being built and there is increased activity in the bauxite and agricultural sectors, but the value-added effects of these activities, especially in the hotel sector, will not be felt for some time.
They will certainly have no meaningful effect on a debt-reduction strategy over the short term. At some point, the debt has to be capped at a percentage of GDP. This is not something that the government finds palatable, for to do so is to restrict its appetite to borrow. The minister does not relish this kind of constraint on an activity to which he seems to have become addicted.
Meanwhile, the economy will continue to lurch from one crisis to the next. Apart from Air Jamaica whose debt is chronic, there are other high-profile projects or companies that are ailing. There is NROCC, that great locomotive of the highway projects; there are rumblings in the NHDC and the Operation PRIDE projects that indicate that things are not well. Not to mention the ongoing financial problems in the sugar industry.
One did not expect the minister in an election year to present a budget that would tell the real truth about the economy. The real truth resides in the pockets and suffering of the Jamaican people; in the lack of employment to university graduates who are highly qualified but to whom jobs are non-existent; in the embarrassment that the housewife suffers each time she goes to the supermarket and has to make sure that her addition is correct before she goes to the check-out counter. Dr Davies, macroeconomic indicators are one thing, but how long must the people of Jamaica wait before they can see a meaningful change for good in their economic prospects? Another 18 years? Are you proud that your monumental achievement in office is to leave a legacy of $1-trillion in debt to the people of Jamaica?
Rev Raulston Nembhard Contributor stead6655@aol.com
Saturday, April 28, 2007
Dr Omar Davies exuded a great deal of confidence as he opened the budget debate for the 2007-2008 financial year.
The defining feature of the presentation resided more in what was not said than what was said. In light of the economic problems that face Jamaica, the presentation indulged in generalisations without specific reference to a number of key economic indicators that are of concern to the Jamaican people.
For example, take the matter of debt strategy. It does not seem that the government fully appreciates the implications of the debt crisis that faces the country. The fact that they do not see the problem as a crisis spells volumes in this regard.
We are fast approaching the $1-trillion mark. Some would argue that we have exceeded this mark if you take into account deferred financing and other high ticket items such as Air Jamaica. It is obvious that the nation is not being told the truth about the level of indebtedness that we face.Take the matter of the NIR, for example. We are not told that the big build-up about which the government boasts is the consequence of loan receipts and not income earned from the productive capacity of the Jamaican people. There is nothing much to gloat about except that this money is available to deal with a number of months of imports but the debt that caused it has to be repaid. And contrary to what the minister would have us believe, that debt is growing exponentially.
The greatest failure of Mr Davies' presentation was the absence of any real strategy to deal with the debt. It does not take a PhD in economics to know that you cannot borrow your way into prosperity. No country can become prosperous by forever borrowing money to deal with recurrent expenditure such as paying government salaries.
It is clear that such expenditures should be met from revenue collection or even taxation as a last resort. But the minister has found it easier to borrow without recognising the real implications of this for the long-term health of the country.
The answer to the debt crisis is to make the economy grow. But the economy has not grown significantly over the past 18 years. We have registered net negative growth over the years. The minister's own growth targets have been missed repeatedly, even when other economies in the Caribbean have registered impressive growth rates. We have to earn our way out of our difficulties, not borrow our way out. The high debt is an index of the failure of the government over its long haul in power to improve the economy effectively.
There are many factors that go into improving an economy and not least among these is the psychology of trust and confidence which are not in ample supply in the productive sector. The government talks about the recovery of confidence while important operatives in the productive sector such as Mr Gordon "Butch" Stewart lament the lack of collaboration between the private and public sectors and the general malaise in the economy. It is this kind of collaboration or dialogue as Mr Stewart calls it that will lead to the generation of jobs.
The truth is that the economy is not as healthy as the minister would have us believe. Macroeconomic indicators such as the declining interest rates may be moving in the right direction - for now. We will soon see how this will impact on the exchange rate. It is true that hotels are being built and there is increased activity in the bauxite and agricultural sectors, but the value-added effects of these activities, especially in the hotel sector, will not be felt for some time.
They will certainly have no meaningful effect on a debt-reduction strategy over the short term. At some point, the debt has to be capped at a percentage of GDP. This is not something that the government finds palatable, for to do so is to restrict its appetite to borrow. The minister does not relish this kind of constraint on an activity to which he seems to have become addicted.
Meanwhile, the economy will continue to lurch from one crisis to the next. Apart from Air Jamaica whose debt is chronic, there are other high-profile projects or companies that are ailing. There is NROCC, that great locomotive of the highway projects; there are rumblings in the NHDC and the Operation PRIDE projects that indicate that things are not well. Not to mention the ongoing financial problems in the sugar industry.
One did not expect the minister in an election year to present a budget that would tell the real truth about the economy. The real truth resides in the pockets and suffering of the Jamaican people; in the lack of employment to university graduates who are highly qualified but to whom jobs are non-existent; in the embarrassment that the housewife suffers each time she goes to the supermarket and has to make sure that her addition is correct before she goes to the check-out counter. Dr Davies, macroeconomic indicators are one thing, but how long must the people of Jamaica wait before they can see a meaningful change for good in their economic prospects? Another 18 years? Are you proud that your monumental achievement in office is to leave a legacy of $1-trillion in debt to the people of Jamaica?
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