Finance Minister Audley Shaw (left) and Opposition spokesman on finance Dr Omar Davies seen here in this April 7, 2007 photo in Parliament. - File

Despite the symbolism of Prime Minister Bruce Golding and other members of Parliament taking a pay cut, and the unilateral decision by Government to institute a freeze on public sector wages, these all fade in comparison to the overhang of the country's current debt position.

The national debt of $1.16 trillion at February 2009 grows by tens of billions each year. The debt hit the $1 trillion milestone back in March 2008.

But, ironically, the Opposition chose to quiz Golding on the budgeted expenditure for the Office of the Prime Minister and its related departments and agencies for over six hours on the first day of the sitting of the standing finance committee which met on Tuesday to review the Estimates of Expenditure for the current fiscal year 2009-2010.

Yet the estimates relating to the Ministry of Finance were reviewed for a scant 15 minutes.

The committee was told that the Opposition spokesman on finance - Dr Omar Davies - had submitted written questions to Minister of Finance Audley Shaw who furnished him with private written responses to some of these questions, while promising to furnish the rest at a later date.

No better position

As a result of this rather tepid exchange, the nation is in no better position to ascertain the true depth of our debt crisis. And let there be no doubt that we are in a most precarious situation.

In the limited exchange that took place between the Minister of Finance and his Opposition counterpart, the minister mentioned some of the contingencies in the Budget for the payment of interest on bonds/loans for NROCC, Air Jamaica, Clarendon Aluminia Partners, Coffee Industry Board, as well as contingency for topping up of pensions and outstanding salary claims by the nurses.

What was obvious is that any detailed analysis of the estimates relating to debt servicing suggests a strong possibility that there are significant outstanding liabilities for public sector bodies that have not yet been brought on to the books of the central government.

In addition, answers to questions raised by Opposition members revealed that arrears have built up in the system in various ministries and agencies for supplies from public utility providers and other suppliers, which are only partially covered in the tabled estimates.

And there are no contingencies for disasters, and other emergencies.

None of this is surprising as there are limited funds available to fund the day-to-day operations of the government once debt servicing and wages and salaries have been taken into account.

More than half, (56 per cent) of the $547.7 billion budget is devoted to debt servicing, and a further 21 per cent is for the payment of wages and salaries.

In other words, 77 per cent of every dollar of revenue earned or borrowed this year will be spent on these two areas, with $124 billion or 23 per cent left to cover everything else.

We have not been privy to the average interest rate and inflation rates on which the budget has been predicated, but a rough guess would suggest an interest rate of around 18-19 per cent at best, and an inflation rate no better than that achieved in FY 2008-09 - a projected 12-13 per cent.

In this type of scenario, and given the projected shortfall in our foreign currency inflows, it is difficult to see how the government will be able to achieve a deficit figure for the current fiscal which will be in single digits.

There have been several calls recently for the Government to seek an arrangement with the International Monetary Fund (IMF), and while the prime minister has signalled that a team will be undertaking exploratory talks with the fund this week, the country should not fool itself that there can be any accommodation that will be totally devoid of conditionalities.

However, Jamaica has limited options available to it outside of talking to the IMF. The private capital markets are virtually closed to us at this time.

In terms of the other multilaterals, Jamaica could receive around US$170 million this year from the Inter-American Development Bank (IDB) for budgetary support, and it might be possible for a further drawdown of US$200 million for on-lending to the private sector under the special facility accessed in the fiscal year just ended.

Available funds

Other funds from the World Bank might also be available, but both of these multilaterals will undoubtedly indicate that they would be more comfortable lending to Jamaica if it were in an arrangement with the IMF.

As the Parliament goes through the motions of the upcoming budget debate, it will become clearer that no matter how much spin the Government and the Opposition put on the way forward, Jamaica has a difficult road ahead. And worse is yet to come.

In this scenario, picking over minute details would not seem as important as getting a handle on the true magnitude of the situation.

renee.shirley@yahoo.com