THE EDITOR, Sir:
I need to refer to Mr Aubyn Hill's thought-provoking article in the Financial Gleaner of January 25, 2013, about voluntary but necessary debt forgiveness for Jamaica, which seems the only way out of our deep financial crisis.
Though rapid economic growth is a solution, is it attainable? We neither have the working capital or the inclination.
One other option is declaring the country bankrupt, and reneging on all debt obligations, but those countries that have taken this step, such as Argentina, cannot find resumption to normal business.
But why would an institution or country want to write off debt by Jamaica or, for that matter, anyone else? What would be gained from refinancing when, in the future of Jamaica, there is no plan to use new money and produce energy, agricultural, manufactured products and services that would pay the debt?
Would any serious business person write off a bad debt of substantial value from a client as long as there is some hope of recovery? I doubt it. In fact, he may take a position to be in line early when repayment or other money from some source is being provided.
What of the multilaterals? Will they come to assist Jamaica resolve a crisis when the total lending package may be used in paying off debt? Then will they lend more money? Yes, but on their terms.
They might monetise the debt, which is buying our debt in the form of bonds and then we print more money, which devalues our dollar, making anything you save, or earn, instantly worth less, while necessities like food skyrocket.
You have to drastically slash spending, stop raising the debt ceiling. In order to pay off the debt, it is also pointless to raise taxes: I think taxes won't even cover the interest into the next 20 years. So there is, in part, an answer: significant devaluation.
Coupled with this, we then need to mitigate the effect of high inflation so caused, produce what we can in terms of food products, and cease unnecessary spending, including capital expenses. It would be a problem to raise taxes, devalue the dollar, and restrict spending all at the same time, so I would suggest we keep taxes as they are.
I would not reject the first intention to negotiate a compromise with all creditors; but this is not the cure-all as cooperation is difficult, and interest is waning.