JAMAICA'S debt position continues to be quite delicate, despite the optimistic scenario being portrayed by the various Government spokesmen. It is good if we can generate a high level of economic growth this year, substantially reduce the interest rate on government bonds (both local and foreign ones), and stabilise wage levels, but we would still be walking a debt tightrope, that will take at least a decade to clear, even if we sought to cap current debt levels today.
It remains a debt tightrope because nobody can confidently predict what can happen in the next few years, as internal and external circumstances can change, to improve or deteriorate the current debt scenario. Argentina moved quickly from 'economic blond blue-eyed boy' to pariah in a few months, two years ago.
Jamaica owes a little over US$4 billion but its debt to external GDP ratio is high as well as its debt to export ratio. Argentina owes US$100 billion (with $21.6 billion of this owed to international institutions). Argentina paid off a US$793 million debt to the World Bank, one month late, in May and refuses to use its depleted foreign exchange reserves to meet some of its debt obligations. It has just agreed to pay off an outstanding US $3.1 billion owed to the IMF to continue to draw-down a US$13.3 billion loan package started over three years ago. Both Jamaica and Argentina have issued government bonds with high interest yields in the past.
Jamaica has an outstanding record of never ever defaulting on its external debt obligations, while Argentina has, given its recent troubles, been threatening to pay 25 cents on the dollar to its bondholders and delayed or even postponed some of its external debt obligations as they became due. Not surprisingly, some U.S. creditors have turned to the U.S. courts, seeking to have Argentinean U.S. property seized to settle such debt.
LOCAL DEBT WILL SUFFER
Jamaica's Minister of Finance, Dr. Omar Davies, keeps insisting in his public speeches, as recent as his address in March 2004, to UWI Chancellor Hall students, that the greater priority is to service debt obligations. He means, of course, external debt obligations, as public sector workers and contractors who suffer delayed payments have to join a growing line, for local debt obligations.
The Argentinean President Nestor Kirchner, by contrast in March of this same year, is reported as having told his Congress, that "We will not pay off the debt at the cost of the hunger and the social exclusion of millions of Argentines, fuelling more poverty and raising social tensions."
Political grandstanding aside, the contrasting positions may well be defined by the fact that the Argentina population is more likely to react violently to further deterioration of its social conditions, while here in Jamaica, there is little likelihood of street protests unless it is to protest police shootings, an arrest of a community don and a few instances of water disruption. Few see any significance between inability to fund a fire truck and an external debt payment. There are serious questions of morality about borrowing and not paying due debt, but also serious questions about committing future generations to onerous debt costs that curtail their ability to function. The respective borrowers may well have to consider how important is international financial support over domestic support before deciding how best to proceed. It remains an interesting tightrope walk.
