Tough decisions coming - Golding - Holders of government debt safe as administration slashes expenditure
Published: Wednesday | August 12, 2009
The Government is again warning Jamaicans to brace for painful changes as it prepares to institute measures to guide the island out of its present economic pickle.
Already the administration has slashed its expenditure plans, spending $18 billion less than it had scheduled in the first four months of this fiscal year.
The majority of that belt tightening came last month when the Government paid only critical bills as it cut its planned spending by almost $14 billion.
There was no better news on the revenue side as projected income for the first four months of the year fell short by $10 billion.
That is a drastic worsening of the position from June when revenue was $7 billion below target and expenditure was $3.6 billion below provision.
"Tough decisions will have to be made. Tough decisions will be made," declared Prime Minister Bruce Golding to a captive audience at a Private Sector Organisation of Jamaica Chairman's Forum held at The Jamaica Pegasus hotel in New Kingston yesterday.
"We are now combing through the Budget line by line because further drastic cuts will have to be made," Golding declared in an ominous warning.
"These will be reflected in the Supplementary Estimates that will be tabled in Parliament in September."
The prime minister made it clear that he was under no illusion that the bitter medicine would be accepted by all Jamaicans but vowed that he was committed to making the changes needed to resuscitate the economy.
"In our present circumstances, taking action is not an optional endeavour. We either make the right things happen to us or allow the wrong things to happen to us," he said.
"My own credibility and political future are on the line, this line, at this time," declared Golding who has served as prime minister since September 2007.
However, Golding was adamant that one aspect of his credibility that would remain intact is treating with Jamaica's responsibility to its debtors.
Never an option
In response to rating agency Standard and Poor's (S&P), which last week downgraded Jamaica's debt rating from B- to CCC+ on the basis that the country could be forced into a "distressed debt exchange," Golding said this was never an option.
"Jamaica has never defaulted on its debts and there is absolutely no chance of Jamaica defaulting on its debts," he said. "Not only are we one of few countries where debt service and repayment are guaranteed by a constitutional provision which is entrenched but, in addition to that, the Government of Jamaica - this one and all governments that have preceded it - has never flinched in making any and all necessary adjustments to ensure that we meet our debt obligations."
Golding argued that S&P's concerns stemmed from an option that was being explored after market players, in a genuine desire to help the country, suggested some bonds be replaced by lower yielding instruments with longer maturity.
"At all times it was understood that this would only be done on a voluntary basis and at no time would it involve any loss in the value of the bonds," said Golding.
According to the prime minister, while the Government welcomed the idea, it was aware that the issue was complex and it had no desire to change the rules for persons who had invested in these bonds.
Golding noted that the S&P downgrade has already started to have a negative impact on Jamaica but argued that the measures being implemented over the medium term were designed to display the Government's commitment to making the necessary changes.
Golding's medium-term economic programme
1) Eliminating the fiscal deficit and achieving a surplus by 2015.
2) Benchmarking public-sector wage costs to no more than nine per cent of GDP.
3) Reducing interest costs to less than 10 per cent of GDP.
4) Restructuring government departments to reduce costs and improve efficiency.
In our present circumstances, taking action is not an optional endeavour. We either make the right things happen to us or allow the wrong things to happen to us. - prime minister