By Dennise Williams, Staff Reporter
The bus service before 1999, was divided among independent franchise holders. - File
CONSIDERING THE early projections of an J$18 billion fiscal deficit facing Jamaica for this financial year, the government would have a tough time finding an additional J$12 billion.
But on October 2, 2003, the Ezroy Millwood-led National Transport Co-operative Society (NTCS) got a massive $12 billion arbitration award against the government for breach of contract. The award consisted of $4 billion in lost income for the years of 1995 to 2001 plus interest calculated from each year at treasury bill and commercial bank rates.
At a press briefing on October 13th, Minister of Information, Burchell Whiteman, said the Government would contest the award within two weeks and place an application for a stay of the proceedings.
With current debt accounting for 67 per cent of the 2003 budget, both the Ministry of Finance spokesman and an independent financial expert agree that taking on more debt is the only way the government could finance that payout.
"It is a whole lot of money," said Cordell Braham, communications officer at the Minister of Finance. "In the budget presentation of 2003, the new tax regime amounted to $14 billion. So $12 billion is a whopping amount for anyone's budget."
In terms of hard figures as to its impact on the budget, Braham did not want to speak in detail as, "the government is considering making an appeal, so I wouldn't want to make an unnecessary statement."
However, he gave Wednesday Business a hint of how the Government would handle payments in the event that they are unsuccessful in dodging the decision.
"Government history shows that the payment would have to be stretched over a period of time," Mr. Braham said.
Charles Ross, managing director of Sterling Asset Management Ltd. concurs with Braham.
"The government basically has two strategies to pay the NTCS," Mr. Ross said. "They can negotiate for payment over time, say one to three years. If this is unsuccessful, they will have to borrow the money from the public." Ross said the most likely strategy would be to issue Local Registered Stocks (LRS). "The LRS is a medium to long term instrument that Government uses to borrow in Jamaican currency."
Ross said the award would not cripple the country fiscally.
"It seems that the strategy of the Government, like any debtor, would be to use the courts to postpone the time to make payment," Mr. Ross said. "So the actual cost wouldn't come on stream until next year or the year after. But the interest clock is ticking and it would benefit the government to work out a payment plan. But the eventual payment won't lead to a collapse of government finances."
Ross said he could not comment on the fairness of the award. He said, however, "the ramshackle service was because there were not enough fare increases. Any business requires sufficient income and without this, quality suffers."
