The latest restructuring of J$860 billion of Jamaica's domestic debt was, from the start, a done deal. For as Richard Byles, the head of Sagicor Jamaica, observed, the alternative was too difficult to contemplate.

None of the financial institutions, or the other big holders of domestic bonds, wanted to be tagged as the one that caused the Government's negotiations with the International Monetary Fund (IMF) to collapse.

More important for the financial sector, the J$119 billion in interest that savers and investors will give up because of lower interests and extended maturities is still 45 per cent, or J$96 billion, less than what would have been foregone, upfront, if they had endured a 25 per cent haircut on principal.

The deep haircut, apparently, was the IMF's preferred option. Their logic is understandable, given the need to bring under control Jamaica's debt of 140 per cent of GDP: absorb more pain now and lessen the likelihood of the Government, sometime in the near future, having to again approach its lenders for another dose of debt relief.

The countervailing concern, of course, was that the advocated haircut would be too great a shock for Jamaica's financial institutions, and that the economy would be made to spiral even further into recession.

In the aftermath of the National Debt Exchange (NDX), as this initiative has been dubbed, the fundamental question confronting our Government is how to avoid a replay, down the road, of the current scenario.

In this regard, there are two things that are critical for the Government to appreciate, which it claims to do.

Means to an end

One is that the restructuring of the domestic debt is not an end in itself, but a means thereto; it provides the Government with breathing space to begin to deal with its chronic addiction to debt. Second, it would be likely that another round of debt restructuring will not be as easy to accomplish.

It was only three years ago that the Jamaican Government, albeit another administration, was asking its domestic lenders for relief. With adjustment fatigue setting in, next time debtors may baulk.

The larger point here is that the Government delivers on its side of the bargain that it made with the IMF, financial institutions, and, more important, with Jamaica's savers and investors, when it made the case for the NDX. In other words, it must show a credible path towards sustainable debt reduction and sustained economic growth.

The Government must:

• Rationalise a bloated public sector and its associated wage bill;
• Reform the tax system to bring more people into the net while encouraging investment and ensuring simplicity and transparency;
• Follow through on its undertaking to have civil servants contribute to their pensions in a funded scheme;
• Divest itself of enterprises and services that are not core to the management of the State, except for those that are safety nets for the society's most vulnerable; and
• Establish a bureaucracy that is facilitatory of enterprises.

This last point is important. For, declared policies notwithstanding, the NDX and related efforts will come to naught if the bureaucracy is not invested in, or lacks the talent and skills to affect the transformation. Ensuring that this happens is in the remit of the administration and the leadership of the prime minister.

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