THE EDITOR, Sir:
In recent times, pundits have been lobbying for a default on the national debt, or devaluation. However, most of The Gleaner's letter writers who have been engaged in the debate have failed to cite specific examples or give a thorough analysis of these issues.
If Jamaica defaults on the national debt, this will negatively affect our creditworthiness and our ability to secure foreign investments. Further, since Jamaica will be seen as a risk, creditors will be forced to provide us with loans at a higher rate of interest.
Defaulting will have a debilitating effect on the local economy because borrowing costs will increase.
Also, the Government may be forced to pay consultants a hefty sum to restructure the debt. In addition, creditors will be in no hurry to support a default, for two reasons.
First, they will lose a significant chunk of liquid assets, and second, this may cause an economic crisis in the financial sector. Therefore, creditors will see it as a liability.
However, devaluing the dollar is not an option either. Devaluation will make importing expensive and exporting cheaper, but sadly Jamaica's economy is not an export-oriented one. There are several issues plaguing manufacturers in Jamaica. These include: the high cost of crime, bureaucracy, low worker productivity, and an exorbitant energy bill.
The cost of production in Jamaica is too high, and the crime rate is escalating. So when we take these factors into account, it is quite obvious that consumers will be forced to pay for goods and services at a relatively high price.
ADDRESS FUNDAMENTAL ISSUES
Furthermore, because of the size of our market, we cannot afford to produce everything for ourselves. If we try to do so without solving the fundamental issues plaguing the manufacturing sector, the cost of production will lead to massive price increases and further aggravate inflation.
It must also be noted that Jamaica is a signatory to the World Trade Organization treaties and the Economic Partnership Agreement with Europe, which prevent us from rejecting goods from North America and Europe or placing a tariff on them, so import substitution is a form of wishful thinking.
Jamaica has the resources to reposition itself for economic excellence. However, this administration has yet to articulate a coherent plan for economic growth and development.