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Debt-to-GDP ratio on downward trajectory

Published:Wednesday | March 5, 2014 | 12:00 AM
Dr Peter Phillips, minister of finance, planning and public service, giving an overview of Jamaica's economic state at the Ministry of Finance/International Monetary Fund (IMF) press conference at National Heroes Circle recently. Beside him is IMF Mission Chief Dr Jan Kees Martijn. - File

McPherse Thompson, Assistant Business Editor

Jamaica's debt ratio is on a downward trajectory and, by March 31, is expected to be eight per cent lower than it was at the end of fiscal year 2012-2013, Finance and Planning Minister Dr Peter Phillips said.

Prior to Jamaica's agreement with the International Monetary Fund (IMF) on May 1, 2013, the debt-to-GDP ratio was at 147 per cent, but by the end of March it is expected to be lowered to about 139 per cent, the finance minister said.

Giving an update on the economic reform programme at a stakeholders conference at the Montego Bay Convention Centre in St James last Friday, Dr Phillips said the Government would continue to implement measures to reduce the debt, as it aims to have a balanced budget for the next financial year.

According to the IMF Country Report Number 13/378 on Jamaica, more than half of total public debt is domestic debt, which is mostly held by domestic residents (mostly financial institutions). It said downward debt trajectory is contingent upon sustained fiscal consolidation going forward, pickup in growth and stability in the financial sector.

Dr Phillips said the economic reform programme has been effective as far as economic growth is concerned.

"Growth in the June quarter of last year was flat; in the September quarter, already reported and confirmed by STATIN (the Statistical Institute of Jamaica), growth was around 0.5 per cent, and for the December quarter, IMF numbers had it at 1.4 per cent. We expect that momentum to continue through the March quarter and we (should) end the fiscal year with growth somewhere between 0.7 and one per cent," he said.

The minister said that despite adjustments in the foreign-exchange rate, inflation will be contained within single digits by the end of the fiscal year.

"The budgets have been tight, but we have kept the faith as far as our commitment to social protection is concerned," he said.

"Our objective is to alleviate poverty, but our main objective, quite frankly, is to ensure that we can provide the growth and the jobs so that we eliminate poverty as a phenomenon in our national life in the course of the next generation," the minister added.

Dr Phillips, addressing another forum at the University of the West Indies recently, said that unless Jamaica has a wish for national suicide, the Government has no option but to make the current economic support programme with the IMF a success.

Moreover, he said that in the present geopolitical context there were no alternative options.

"And I say this in contrast to views expressed 30, 40 years ago when we were in similar situations (and) there was some alternative source of external financing that the country could look to," Dr Phillips said.

Referring to the diminished role of the Eastern bloc and the Non-Aligned Movement consequent to the end of the Cold War, the minister said, "There is no godfather or godmother that is accepting responsibility for our well-being as a country."

Speaking on the theme 'Jamaica and the IMF: Is this time different', Dr Phillips said, "We had reached the point where our public debt was unsustainable."

He added: "We had no prospect but to embark upon a robust and ambitious reform programme aimed at reducing the debt."

Dr Phillip said "part of the way forward is to ensure that we convince the market that we are not about to return to our national addiction of excessive borrowing, and that means running a very tight set of budgetary arrangements".