EDITORIAL - Questions on debt-management bill
Like Peter Phillips, the finance minister, and his shadow and predecessor, Audley Shaw, under whose watch it was drafted, this newspaper believes that last week's passage by the House of a debt-management bill is an important step towards greater transparency and order in the management of the economy.
We are not, however, sanguine that the proposed law goes far enough. We suggest, therefore, that the Senate, where thoughtful, reflective discourse is usually more likely to be found, display those characteristics when the bill reaches it for review. For while the Senate cannot, ultimately, prevent the passage of a financial bill such as this one, its opinions can be persuasive.
The good thing about this legislation, apart from streamlining the authority of the finance minister to raise debt, is the attempt it makes to limit the Government's ability, as too often has been the case in Jamaica, to go off on borrowing binges.
Wasting other people's money
Jamaicans are too painfully aware of this management misbehaviour. Our debt is a Greek-style 140 per cent of Jamaica's annual output of goods and services, which, once it is serviced, leaves the Government with only enough revenue from taxes and grants to pay less than 20 per cent of the salaries of its employees. Rather than put the finances right, and without consequences for doing so - except the vague possibility of voter disaffection at the next election - our governments have, up to now, borrowed more to fill gaps and meet other public expenditure.
It is this profligacy with other people's money that has caught up with us. Financial markets are now leery about lending to Jamaica and the International Monetary Fund has the Government over the barrel for a new credit agreement.
The proposed law would bring some discipline to the minister's annual borrowing, limiting it to, in exceptional circumstances, the sum of:
- The principal on debt fall due in that financial year;
- The amount of the fiscal deficit; and
- Borrowing ahead of time to meet principal payments due within 12 months.
Beyond these limits, the Government will be able to borrow additional amounts up to five per cent of the value of principal payments to meet other expenditure, including, the bill says, "to finance the fiscal deficit".
This brings us to our concern and where we expect the members to weigh in and hope for clarification from Dr Phillips. We would have welcomed a declared and specified legislative cap on the fiscal deficit any government is able to run, rather than leaving it to the good sense and management of the finance minister, even with the transparency in debt accumulation and management oversight that will be consequences of the law.
For instance, it is this administration's intent to balance the Budget by 2016, which means a progressive reduction of the fiscal deficit. But nowhere, insofar as we can tell, is the target enshrined in law. Assuming the target is met, there is nothing to prevent some future irresponsible finance minister to lead Jamaica into another chasm of overspending and over-borrowing. Further, there appears to be nothing in the proposed legislation that imposes penalties on the minister, or the oversight bodies to be established, for failing to meet fiscal or debt-management targets.
We look forward to hearing from the Senate.
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