THE EDITOR, Sir:

It was good to see Aubyn Hill put the more radical debt options on the table with his column 'Default or devalue' (Financial Gleaner, September 28, 2012).

A partial default/moratorium is the only option if we are to meet the multilaterals' challenge and grow the economy out of debt (helping our people at the same time). Further austerity can only undermine efforts to do this, to build physical, institutional and human capital. The current IMF medicine now is as self-contradictory as it ever was.

Aubyn also writes: "All this pushback [against a default] is not without a significant measure of irony. Through the 1990s and up to 2011, some of these financial institutions were major debt facilitators who were consistently influential in loading the GOJ - and, by extension, Jamaican taxpayers - with unsustainable debt."

Quite correctly, this recognises the shared responsibility of a debt burden - after all, the substantive part of a bank manager's duties in the past was to advise on, assess and, perhaps, grant loans. Once unsustainable, debt falls within the odious category and thence an acceptable target for writing down.

I also think the IMF should share/shoulder responsibility for the FINSAC part of our debt, given that the too-rapid, uncontrolled financial liberalisation in the early 1990s was based on its 'advice' (coercion?).

Yet, even given substantial debt relief of some sort, much else is needed to get us on track, including:

Local investment in the real economy - Desmond Malcolm, general manager of UDC, says plenty is available.

Attention to low productivity.

Revisiting our WTO commitments to reduce imports, especially of foodstuff.

Cutting the social safety net, spending on education and health, on pensions and the front-line public services should NOT be contemplated. Ordinary people didn't cause the financial collapse, nor have they been spoilt by government largesse.

Fiscally, we might be in deficit, but leave out the debt and we've had a primary surplus for years - the Government collecting more in taxes than it spends currently on the electorate. It's the unelected bankers and bondholders who have benefited unduly, extracting a tribute from the taxpayer now as large as any in our history.

Devaluation as an alternative option to default would punish the majority, unfairly so, as I have argued above. And it would leave the foreign banks and bondholders unscathed. They need a haircut too, if not more.

I think Belize is showing that small but bold can be just as good as 'too big to fail'. Will Peter Phillips allow himself to consider any other than dead-end options? With a partial default, we would not need to go to the foreign capital markets. Those completely compromised credit-rating agencies would then not be able to bring us down.

PAUL WARD

pgward@cwjamaica.com

Kingston 7