Avoiding Jamaica's worst nightmare
Jamaica is at a crossroads. A wrong turn could lead to its worst nightmare: its collapse and failure as a state. The right turn offers a chance of economic stability, recovery, growth and jobs.
But this will require, first, someone taking charge of the Government. Then the administration has to start implementing a credible plan to deal with the debt crisis. It would, thereafter, invite the International Monetary Fund (IMF) to support the programme. It is a shame that, despite the administration's protestations to the contrary, our Government seems to be waiting on the IMF to tell it what is to be done. For that is known.
The crux of Jamaica's problem is its debt of J$1.68 trillion, excluding amounts owed but not accounted for in published data. The overall debt is 140 per cent of gross domestic product, placing Jamaica on the same plane as Greece and other troubled Eurozone countries.
Servicing the debt consumes nearly 60 per cent of the Government's annual Budget. What is left can cover less than 20 per cent of the salaries of government employees. The Government has to borrow to meet its other expenses. This is unsustainable. The huge debt-servicing cost siphons cash from critical areas, such as education, national security and the maintenance of public infrastructure.
The Government has to borrow less and bring its spending in line with its income. The Government says it has the formula: it is to overhaul the public sector for efficiency and cost; civil servants are to be asked to contribute more to their pensions; and the tax system is to be revised to minimise evasion and corruption to ensure that more people pay their fair share.
But nearly a year into its five-year term, the Simpson Miller administration is proving as incompetent as the last Jamaica Labour Party Government. Its only expertise is to talk.
The Government's indecision tells in the country's declining net international reserves, sliding currency, and last week's negative outlook for Jamaica by the ratings agency Standard & Poor's and its warning that if things don't turn for the better, it will downgrade the Government's bonds.
A nightmarish spectre
The administration's failure to act could cause a nightmarish spectre to materialise. Continued waffling and indecision, and the absence of an agreement with the IMF, would lock the external financial spigots tighter. Devaluation of the Jamaican dollar would accelerate and the country's declining reserves could disappear.
Debt default would soon be on the horizon. The result would be capital flight, a government-caused bankruptcy of financial institutions, and the loss of deposits of savers and pension schemes. Unemployment would rocket. Street demonstrations might be inevitable. The recent reversal of gains against crime would worsen social disorder.
Faced with a collapsing state and an absent government, there may be a popular demand for an alternative. Who would provide this? The Jamaica Defence Force, which surveys say is the country's most credible institution, might appear attractive as leadership-by-coup.
This nightmare - now thankfully only a bad dream - can be avoided if the administration wakes up. But where is the Government? Where is its leadership?
Wake up, Prime Minister. Get your Government functional and get us out of this mess.
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