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Debt-management strategy

Published:Tuesday | January 12, 2010 | 12:00 AM


I agree with the 'No room for error' perspective headlined in The Gleaner of, Monday, January 11.

The Government's proposed debt-management strategy signals the central building block for supply-side economics. This strategy represents the complementary strategy to the recently tightened demand-management strategy. On the one hand, the general consumption tax has been increased and this increase restricts consumer demand while, simultaneously, Government is creating an economic framework for cheaper debt being made available to Government, industries, firms, individuals and, ultimately, consumer spending.

But, the inevitable question becomes equivocal. The nature of banks is to create and sell debt. One of the functions of government is to provide for the most vulnerable. For too long local banks have been creating and selling expensive debt to the Government and people of Jamaica. This has led to prolonged economic stagnation and socio-economic dislocation, no doubt.

Central to the challenges of the Government is to find a bank or multilateral funding institution that is willing sell debt at a cheaper rate in order to complement efficiently and effectively the harsh realities of demand-management strategy. The International Monetary Fund (IMF) seems to be the answer, but there are further problems. We have now entered the realm of a battle for the purchasing of debt - the strategy is either to purchase cheaper debt from multilateral institutions or continue purchasing more expensive debt from domestic banks.

The current debt-management strategy by the Government calls for a skilful balancing act and so there is 'No room for error'. Let the debate continue with greater sensitivity.

I am etc.,