Dear Editor,
At last, one of our local economists, Dr Andre Haughton, has called for debt relief as discussed in his article 'Jamaica should seek debt relief'[Jamaica Gleaner 1/23/2013]. If Jamaica were to sign an IMF agreement without debt relief, the dramatic cuts in expenditure — and increased taxes [which Dr Peter Phillips says are to come]— will cause adjustments so severe that the likelihood of social unrest should not be ruled out. And, if so, any chance of achieving sustainable economic growth would be a fantasy.
I have been calling for debt restructuring since 2008.
On November 2, 2008, the Sunday Gleaner carried an article by me entitled 'Jamaica could save billions annually', in which I suggested that immediate action should be taken where "Jamaica needs a domestic-type Paris Club where all the major holders of local debt come together and renegotiate with Government at longer terms at lower interest rates and with appropriate moratorium on principal repayments".
The Jamaica Debt Exchange was a step forward, even though debt moratorium may not have been included. [I am not sure] Unfortunately, the benefits from such a programme, with meaningful support from the financial institutions, were wasted as Jamaica piled up more debts and we are in a worse position today.
On June 1, 2012, the Gleaner published an article by me, 'Jamaica should go to the Paris Club', although Jamaica may not meet the existing requirements to seek support through that avenue. But given that Jamaica is one of the most indebted countries in the world based on debt to Gross Domestic Product criterion, some avenue for debt relief has to be found.
In that article I said: "Marginal budgetary adjustments cannot deal with Jamaica's debt problem... We have, for too many years, faced an unsustainable debt crisis which cannot be solved by conventional means... Other countries have faced serious debt crises and took the decision that conventional approach cannot work. They turned to what is known as the Paris Club to have their debts rescheduled, partially forgiven, and then returned to economic sustainability."
Last year I believe that it was the finance minister from the Seychelles who was invited to Jamaica to herald the Seychelles' recent economic success after having benefited from the Paris Club debt relief programme.
I suggest that any IMF agreement should seek to have that institution, along with the World Bank, IDB and CDB, commit to playing a lead role in helping Jamaica achieve partial debt forgiveness/restructuring. There is no escape that there will be budgetary cuts — and possible tax increases — to improve the fiscal accounts and these will cause inescapable hardships and suffering.
But these should be complementary to a partial debt relief programme without which I cannot see any IMF agreement succeeding in helping Jamaica moving towards economic sustainability.
I believe that it would be extremely timely for major stakeholders in the Jamaican economy, leaders from both political parties, business organisations and the trade unions to address this issue and, hopefully, come to the decision that we should go forward with an IMF agreement only if it includes a debt relief component.
Dr Paul Chen-Young
pchenyoung@gmail.com
Debt relief must be strategic imperative in any IMF agreement
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At last, one of our local economists, Dr Andre Haughton, has called for debt relief as discussed in his article 'Jamaica should seek debt relief'[Jamaica Gleaner 1/23/2013]. If Jamaica were to sign an IMF agreement without debt relief, the dramatic cuts in expenditure — and increased taxes [which Dr Peter Phillips says are to come]— will cause adjustments so severe that the likelihood of social unrest should not be ruled out. And, if so, any chance of achieving sustainable economic growth would be a fantasy.
I have been calling for debt restructuring since 2008.
On November 2, 2008, the Sunday Gleaner carried an article by me entitled 'Jamaica could save billions annually', in which I suggested that immediate action should be taken where "Jamaica needs a domestic-type Paris Club where all the major holders of local debt come together and renegotiate with Government at longer terms at lower interest rates and with appropriate moratorium on principal repayments".
The Jamaica Debt Exchange was a step forward, even though debt moratorium may not have been included. [I am not sure] Unfortunately, the benefits from such a programme, with meaningful support from the financial institutions, were wasted as Jamaica piled up more debts and we are in a worse position today.
On June 1, 2012, the Gleaner published an article by me, 'Jamaica should go to the Paris Club', although Jamaica may not meet the existing requirements to seek support through that avenue. But given that Jamaica is one of the most indebted countries in the world based on debt to Gross Domestic Product criterion, some avenue for debt relief has to be found.
In that article I said: "Marginal budgetary adjustments cannot deal with Jamaica's debt problem... We have, for too many years, faced an unsustainable debt crisis which cannot be solved by conventional means... Other countries have faced serious debt crises and took the decision that conventional approach cannot work. They turned to what is known as the Paris Club to have their debts rescheduled, partially forgiven, and then returned to economic sustainability."
Last year I believe that it was the finance minister from the Seychelles who was invited to Jamaica to herald the Seychelles' recent economic success after having benefited from the Paris Club debt relief programme.
I suggest that any IMF agreement should seek to have that institution, along with the World Bank, IDB and CDB, commit to playing a lead role in helping Jamaica achieve partial debt forgiveness/restructuring. There is no escape that there will be budgetary cuts — and possible tax increases — to improve the fiscal accounts and these will cause inescapable hardships and suffering.
But these should be complementary to a partial debt relief programme without which I cannot see any IMF agreement succeeding in helping Jamaica moving towards economic sustainability.
I believe that it would be extremely timely for major stakeholders in the Jamaican economy, leaders from both political parties, business organisations and the trade unions to address this issue and, hopefully, come to the decision that we should go forward with an IMF agreement only if it includes a debt relief component.
Dr Paul Chen-Young
pchenyoung@gmail.com
Debt relief must be strategic imperative in any IMF agreement
-->