Dawn RitchIRRESPONSIBILITY IN public spending, much less admitted and uncontrite irresponsibility, has all too painful and public consequences.
Dr. Omar Davies, Finance Minister, boasted in 1996 and 1997 about his instrumentality in ensuring that Jamaica became a rated country. We were now going to be rated by international credit agencies, he said, and by so doing would have better access to the international capital market.
Well, as soon as Dr. Davies began to run up his mouth about busting the budget, and the ways and means in which he did it, Jamaican's credit rating was downgraded to negative on the international capital market.
This means that the people who bought Jamaica Government US-dollar-denominated bonds a year or two ago, have lost value. Every single one of these bonds has gone down in value. They are now trading at about 90 cents in the dollar.
And what an active secondary market it has become! Overseas bond holders are dumping them because of Jamaica's negative rating, and Jamaicans are running to pick them up because of the higher interest rates. Dr. Davies' actions have therefore led Jamaicans to run down US dollars to buy US dollar-denominated bonds and caused a continuing steep decline in the value of the Jamaican dollar.
A news report on radio stated that between January and the end of February, gasolene prices at the pump went up 37 per cent, diesel also went up big-time. Anybody who has to fill a tank, or take a taxi knows that. The prices in the supermarket were the first to feel it.
Dr. Peter Phillips, Leader of the House of Represen-tatives, demonstrated more fool-hardiness than sense therefore, when he recently tried to defend Dr. Davies' statements. Dr. Phillips said that actual Government expenditure above the amounts budgeted was $5.5 billion. Of this amount he said $3.5 billion represented wages and salaries.
GIVEN OUT, NOT BUDGETED FOR
The amount given to the civil service last year was much more than that, more like $10 billion. It was given out, not budgeted for, and not publicly announced either. Nor did the civil service say they got it, even though they did.
Opposition Spokesman on Finance Mr. Audley Shaw has already said that the agreement for backpay was signed with the civil service in February 2002. So there was no good reason to leave it out of the annual budget tabled in the House just two months later.
Despite knowing their much bigger and secret obligation to public sector employees, the Government came to the House with a budget saying there would be no new taxation.
Dr. Davies had said last April that in effect there was no need to raise revenues, only to improve the collection of them. Had he disclosed, however, the new salary obligations to the civil service in his Budget, the Finance Minister would have had to address the issue of the Budget deficit, and either raise taxes or cut expenses or both.
Instead while government user-fees and fines went up terrifically, the Government itself was presenting an election budget of no new taxes being necessary and pretending that everything was in good order.
As we now realise, however, Dr. Davies misled the country most egregiously in his constitutional office of Minister of Finance. He presented a budget to the country last year which was fundamentally inaccurate. Opposition M.P., Mr. Abe Dabdoub, in his contribution to the House debate went straight to the point when he said, "This admission (by Dr. Davies) clearly demonstrates an impairment of principle".
The Government has been going to elaborate lengths to say that what Dr. Davies said he didn't mean, it didn't happen, it couldn't happen, nothing of the sort did, and that he was just trying to connect emotionally with the PNP party faithful.
According to figures from the Bank of Jamaica, however, money supply in September 2002, the month before the last General Election jumped by $16.8 billion, or about 30 per cent above each of the many previous months running before. The farce of an independent central bank, which abetted the fiscal crisis, is laid bare by the tremendous increase in the amount of money in play, allowing expenditure and largesse on a scale unprecedented in the month just before the October 16th General Election. Only the BOJ can increase money supply. By its actions the BOJ has become an appendage of the Ministry of Finance.
We all know what happened the following month, a historic fourth term for the People's National Party exactly as Dr. Davies subsequently claimed he had been instrumental in creating. The BOJ figures are evidence therefore that he spoke the truth, and damned the consequences.
One of these consequences is a sliding Jamaican dollar on which he no longer has a rein, and another is a country on which the investment grade rating could be withdrawn on the international credit market, unless dramatic steps are immediately taken to cut the fiscal deficit.
Dr. Davies always took voluble and personal credit for previous 'B' ratings given by these credit agencies. We wait with bated breath therefore, to see whether or not he will hold himself responsible should the country lose its bond rating. And would the Prime Minister then sack him?
LOYAL COMRADE
The Most Honourable P. J. Patterson is in league with him, and doesn't relish the sack either. He may have no choice but to do so, however, since it will become more evident that his loyal comrade ran the country's affairs as though they were that of the People's National Party. There was an announcement of no new taxes last year because it sounded good, and the Budget was busted and money supply increased because it made the people feel good.
Well, they don't feel so good any longer, because they're having to pay the price for a fourth term of the PNP. And there's no stopping the rising costs, because the country is now faced with the difficult choice of guns or butter. Because we cannot have them both.
We can expect great pain therefore, when the Budget is presented this year, because the Government has to come to grips with the severe national economic damage caused by its profligate and irresponsible fiscal programme.
Very soon Jamaica will have to bite the bullet. Since things were getting palpably worse last year, and not better as we were repeatedly told, it seems a bullet is now in order.
