Fri | May 27, 2016

In search of 'voluntary but necessary' debt forgiveness

Published:Friday | January 25, 2013 | 12:00 AM
Aubyn Hill, Financial Gleaner Columnist
A side view of the Ministry of Finance, in Kingston, seat of the Treasury. - File

By Aubyn Hill, Financial Gleaner Columnist

Our huge national debt, about J$1.7 trillion, and that elusive agreement with the IMF have been our focus in Jamaica for the past two or three years.

Given that our debt to GDP is about 140 per cent and growing, it is natural that it should have occupied so much of our nation's political, business and civic leaders' attention.

Jamaica's debt is a very difficult fact, a real and growing burden on our taxpayers and ordinary citizens, but it is history.

In our almost single-minded focus on the country's debt burden, we seem to have lost sight on one of the main factors which will reduce that debt - rapid, or much better, economic growth.

The other part of the tandem of debt reduction in Jamaica's case, bearing in mind our shortage of cash and our perennial inability to find large amounts of non-borrowed cash through normal fiscal means, is debt forgiveness or some more severe and broader JDX2-type 'voluntary but necessary' arrangement.

Our history of economic growth over the past 40-odd years is well known and pathetic.

The approximately one per cent average annual economic growth over that long period of time since our political independence points to the fact that our elected leaders, generally, have had no idea how to steer the country on the paths of growth.

The long history of poor economic performance makes the powerful argument that our political leaders were entirely oblivious of the importance of economic growth, and clearly and wilfully were uncaring about the vast numbers of poor people who elected them - in large part in response to the often repeated promises from political platforms of all colours that 'better will come'.


There are really only two ways to reduce - not reschedule or roll over - our national debt.

First, we can earn the money by growing our economy rapidly and repaying instalments over time. Second, we can get our creditors to forgive some portion of the principal or interest, or both.

I believe the GOJ is probably hoping for a combination of both. But hope alone will not achieve much.

Debt forgiveness will be the result of really tough and maybe even brutal negotiations because of the financial consequences to existing lenders.

These negotiations will have to be handled with great skill, delicacy, patience and determination because of the potentially negative message an acrimonious set of negotiations could send to future private and multilateral lenders, and the financial markets in general.

If debt forgiveness requires skilful negotiations, then economic growth requires a clear vision, engaged, accountable, forthright and transparent leadership, and a well reasoned and sensible plan around which the nation, at least a respectable majority, can form a national consensus.

So far, our Government has not come forth with any economic growth plan over a medium-term period of time.

Prime Minister Simpson Miller has many non-IMF agreement-related options. The GOJ has certainly moved fast on the scrap-metal issue and some effort has been made on the energy front.

With our US$2.4-billion annual petroleum import bill, and growing, the prime minister and her Cabinet could have put legislation in place in the year they have been in power to lead the National Water Commission to use the private-public partnership which this government is championing to change our energy-guzzling, old and inefficient pumps, and use solar power to provide a substantial part of the energy needed to operate these water pumps.


Within the year legislation could have been crafted, discussed in public forum and passed by Parliament to require all new buildings - residential stand-alones and town houses, big and small, and commercial establishments - to have an important portion of their energy needs supplied by renewable sources.

The same kind of legislation should be implemented for private, institutional and even corporate buildings, with the renewable-energy component tied to the JPS grid.

Negotiation, and if necessary regulation, needed to have been concluded by now to get our near-monopoly energy supplier and our monopoly distributor, JPS, to really speed up the process of buying from individuals and businesses the excess renewable generated power.

On the continuum of difficulty to ease of selling renewable power to the monopoly distributor, we are still much closer to difficulty than ease.

The GOJ seems not to sense the urgency of these changes, nor the excruciating pain of our oil imports. Speed to needed legislation is not dependent on the IMF agreement and could be a real competitive advantage.

Similar legislative and regulatory initiatives, with purposeful speed, could lead to the special arrangements to bring rich tax refugees from Europe to Jamaica.

In the Eurozone persons pay taxes by their residence, not by citizenship. Many rich citizens from France, Greece, Spain and elsewhere are fleeing to Monaco, places in Asia and even cold Britain.

We should pass the appropriate legislation that encourages these tax refuges to come to Jamaica - Minister Bunting and PM, we have to bring down our crime rate to keep atrocities out of European and the world press - to invest a stated minimum amount in Jamaica, employ a stated minimum number of Jamaicans and even to buy an initial minimum amount of GOJ bonds.

We will need to offer very special visa privileges and pass the legislation to allow in their properly treated pets, mainly dogs.

I understand that the draft pet legislation has been in the Ministry of Agriculture since before the PNP won the last general election.

The Ministry of Agriculture should also move very quickly to get Geographic Indications designation for our Blue Mountain coffee which could boost the value of this export. This should also be a growth ministry.

The prime minister should task each member of her Cabinet to find similar avenues where legislation can assist growth by removing red tape or respond to local and global new markets.

A clear and systematic economic growth plan with reasoned time lines for delivery, driven by a capable, autonomous, accountable and prime minister-supported economic manager could build a consensus for growth in Jamaica where now none exists.

Aubyn Hill is the CEO of Corporate Strategies Limited and was an international banker for more than 25 years.Email Twitter: @HillAubynFacebook: