Let the economic reforms begin….unhealthy local debt burden, a sign of disasters on the horizon.
International debt is increasing all over the world. The wealthiest of nations are slowing in growth, and their appetites are well ahead of their sufficiency to provide scarce goods and services.
The financing of international growth or floating the economic development of the nation through debt instruments can be a useful means of improving the well being of thousands of Jamaicans. Many international financial whiz’s believe once the debt is used productively and effectively building schools, bridges, railroads, water dams and roads, durable products on a hold then they will yield healthy returns for sustainable development.
Unfortunately the process of financing debt is a tricky and sometimes treacherous business. The idea is usually that the funds will flow from the economic “haves” to the economic “have nots”. The difficulty is that international loans usually come with austerity conditions. The lending party usually impose a host of expectations officially and unofficially before dispersing the funds to the borrower. The rules governing these loans are usually engineered to promote order, continuity, consistency and compatibility.
In Jamaica’s past many times the regulatory prescriptions offered by lending agencies like the IMF, World Bank and other donors stimulated unrest, moral confusion fiscal and monetary policy problems. The external loans back then buried the nation into rotation of financial paper until infrastructure decay and widespread dislocation occurred.
Since the mid 1990’s when Jamaica deliberately ended its structural adjustment programme with the IMF. The people of Jamaica have managed to finance its budget with funds from the money market. Jamaica’s external debt has remain stagnant even declined at one point ,but, it is the local debt which has been growing excessively.
Shifts in international economics
At the beginning of the 21st century many nations believed that debt forgiveness was the only way that third world nations saddled with debt burdens could equip themselves with a favourable and working budget that would allay developmental fears. Since the international war on terror began in 2001, the impetus of selling a debt reduction strategy to the wealthy nations in the northern hemisphere have diminished. The major industrialised nations in Europe and North America have already made it clear that their stake in the development of nations rest in improving their own GNP. Neutralising the commitment to old partners and friends the wealthier nations of the world have chosen to place their wealth into new redevelopment funding programmes that have been offered to the citizens of Iraq, Afghanistan, Russia, Israel, and Turkey. The indicators of international economic policy shifts demonstrate the beginning of a period where the United States in particular is moving away from social conscience to a preference of rewarding allies supportive of its militaristic objectives.
The private loan lenders are only concerned with nations who have good credit scores and have the ability to pay back within reasonable time. At the same time, multinational companies with huge wealth portfolios are only prepared to support regions/countries where there is much potential for their own nation to win a greater stake in the global market. And while Fortune 500 companies ATT, Pepsi, and fast food giants TG Fridays, Mcdonalds and Wendy’s plug big monies into Jamaica’s economy, credit risk ratings for Jamaica have steadily been increased. International investors have made it clear that they are less than happy with the current climate on the island.
A problem that continues to plague Jamaica is that it is seen as a fairly wealthy yet delicately unstable society, this as the Ministry of Finance has been pursuing unsound fiscal policies as a matter of its own national economic doctrine. Pulling off marginal single digit percentage growth in 2001-2002-2003, Jamaica is at an unusual disadvantage to be considered for debt forgiveness. The island has a functioning democracy, judiciary, resilient civil institutions and has managed to autonomously finance its budget over much of its independent life.
Many still question whether the island has the ability to earn its way out of impending economic turbulence it faces. Widespread corruption in the provision of populist governmental infrastructure programmes have increasingly become a cause for concern among marginalised local communities. The current administration dates back to 1989, and has been apart of many scandals surrounding the awarding of public funds to its own partisan supporters. Many independent observers and analysts believe that although the Prime Minister has said that the public sector need to be curtailed he has neither shown a responsive attitude, the necessary framework or leading will to achieve such a goal. Within the last 2 years Jamaicans have seen civil servants ,parliamentarians and government consultants/lobbyists receive sizeable increases in salary and fringe benefits. At the same time, working class people, labourers, and the unemployed have been asked to pay higher taxes, inflationary prices, and been called to accept a freeze on wages.
Wild Political Spending
The Jamaican Government has steadily been able to finance its operations with borrowed funds in a time when the nations productive capacity and export potential has not kept pace with its appetite for modernising and implementing consumerist welfare programmes. Undoubtedly access to borrowed funds have afforded, building of new schools, road networks, hospitals, new buses for transportation services and provision of increased low cost housing stock.. These probably could not have been had under an IMF’s structural adjustment programme. The economic flexibility which the government of Jamaica now flaunts is however coming at a high cost of capital. The nations banking system is drunk on high interest rates. The financial gurus at the Bank Of Jamaica and Ministry of Finance have been issuing US$ bonds at heavy rates to keep the wealthy in the local system as against financing its budget. The obvious advantage is that this policy has allowed Jamaicans to buy time ahead of what could be a crisis as never been seen.
Jamaica’s staggering debt today occupies 158 % of the budget or over 70 cents of every dollar earned. If the Government defaults on its loans externally then all privilege afforded to the nation will be cut as it will be seen as a notorious credit risk. The IMF most certainly would have to be called in and whatever structural adjustment programme that is prescribed would have to be taken as a matter of survival.
This problem should not be overlooked because the government structures as they exist now occupy and moderate influences, it creates some amount of stability, and allows for opportunity. If Jamaicans, partakers in the democratic institutions that govern us, public and civil servants and citizenry don’t manage our personal and economic responsibilities well, then our independence will be taken from us permanently. If the IMF is called in they shall care less about free education, road repairs or whether citizens can afford to buy a bus ticket to work or not.
Nations under IMF polices are usually more prone for political dislocation and unrest. Jamaica’s own history dictates that waiting for developed countries to approve loans every quarter made for extreme sacrifice. Jamaicans understand that the fragile democracy under any foreign economic programme remain more prone to the lust for power and strife in the distribution of funds. Most of us have learned that under IMF policies of the 1970’s and 1980’s the third hand from far away lands was usually the one in our midst calling the shots blindly. Certainly IMF policies can cripple a nation and cause anarchy, the private sector is usually provided less opportunities as fiscal responsibilities meant meeting foreign advisors objectives in curtailing local cost and expenditures. Down sized police force, health care, industry investment funds and educational facilities meant more lawlessness.
The turbulent times we are living through in Jamaica is widely to be blamed on the uncertainties regarding globalization conquests, yet, failure of the Government of Jamaica to manage the nations economic resources with greater equity and social responsibility cannot be overlooked. Our government cannot afford to wait for the hearts and minds of men and women of the international community to change. We, Jamaicans, are responsible for our actions and we are responsible for our destiny.
A lack of debt reform now, could tumble all nations under an unheard of dictatorial rule. Extensive bureaucracies will have less funds to manage their affairs, yet have the responsibility for calling their nation to order. The people will not wait on the democratic process to effect changes, for they are getting prepared to take matters of action into their own hands. The Government of Jamaica need to renew its actions toward securing a social partnership with all stake holders of the society. Labour unions and private sector companies have got to recognise that curtailing consumerist spending as against forging greater solid and long term relationship with a productive workforce will only lead to continued strife and disunity at the grass roots of the community.
The greed monster is alive
Rampant speculative behaviour in Jamaica’s foreign exchange market in 2003 revealed the nature of the monster we battle against. Under the FX- currency board in former years only travellers and business men where allowed to purchase foreign currency in specified increments when they were doing legal business abroad.
Today every Jamaican is able to buy and sell currency and the result is a demand and supply culture of folks simply thinking of their best interest and making big bucks off buying and selling out their national currency and national earnings. I am reminded, “greed is a bottomless pit which exhaust persons in endless effort to satisfy a need without ever reaching satisfaction”. Erich Fromm 20th century philosopher.
That satisfaction will never come to some men because they are not content with a little sufficiency. The Jamaican government as it exist today could easily revert to a new currency regime that stipulates that only specific people are allowed to buy foreign currency. We are all of us Jamaicans, privileged to have the freedom to move our earnings in and out of the nation, as a matter of convenience.
A Jamaican family travelling abroad today does not have to be placed under scrutiny when buying a 1000 US dollars to visit friends and family on vacation. Neither is a local entrepreneur who is trying to buy raw materials to expand his business subjected to unreasonable exchange bureaucracy. In Good faith, the nation, have been living out a dream of free movement of trade. There are however individuals who continue to utilise the foreign exchange system as a matter of creating direct wealth. These people are identified as the greedy speculators among us.
It should be understood that when a person or organisation wears a speculators cap they are making money off the nations earnings/wealth. They have decided to exploit the trust of having all limits and mystery removed from the foreign exchange system. Jamaica’s earnings cannot be allowed to be distributed and shared up among only men and women who have existing wealth.
While the Jamaican leaving the island is spending his/her earnings and converting it to foreign currency to purchase their leisure abroad. The Jamaican business man is using his earnings or investment to buy raw materials abroad with the hope of plugging back resources into the efficiency of the nation.
The speculator on the other hand is the one using up the national foreign exchange earnings to forward his own personal gains immorally. The speculator unlike the Jamaican traveller or legitimate business man is the one opening the nation to socio- economic tensions associated with rising devaluation costs.
A teacher, nurse, lawyer, doctor, clerk, farmer or business man earns their money honestly by the sweat of their brows. Labouring honestly as a means of proficiently meeting their ends for survival.
Although some may say that speculators uses, his/her/their money to purchase their loot. It should be remembered that they do so off their excess wealth and are burdening the poorer people in the nation.
Once the economy stays unpredictable with currency slides and speculators making a killing off hard earned dollars, then Jamaicans abroad will stop backing the economy.
Jamaicans earning money abroad who contribute to the national earnings via remittances are an integral part to the nations development. They also are losing out when the speculators blow the countries national earnings. For while they are getting paid in another country and spending their wealth and increasing Jamaica’s GNP. It’s a disincentive for these nationals abroad to know that their stake in property, infrastructure, business, and community will be less safe if the Jamaican dollar continue to lose its value.
Blood is on your shoulder
The world is running out of exploitable resources, all our economic networks operate under a condition of scarcity. Scarcity fuel demand and thus Jamaicans who are sitting back tight and storing their wealth in foreign currency and then reselling at a devalued rate, you, are doing so at a cost to the nation. Hiding your wealth in a foreign account don’t help the stability in the community. In fact such actions are allowing the banks to rinse your money over and over again making super profits which they repatriate to places far away.
Bankers do not just lend their deposits once. The banks get away with lending your money over and over again. Most money is called into circulation at any time ,by being lazy and unproductive, living off interest, the community is allowing the evil of usury and exploitation to reign as well as sink poorer Jamaicans into deeper cycles of poverty.
By sharing your wealth in real investment, you can help to counteract the negative employment climate. Joblessness exist in Jamaica because wealthy Jamaicans are hiding their wealth rather than employing it to allow for more people to eat a food. Fear of paying property taxes, pay-roll-wages, national insurance, duty on imports, as against acquiescing to high interest rates and creating excess wealth through money markets can easily be attributed to some of the causes of social unrest, riots and murders in Jamaica.
The meek shall inherit the land
No country is self sufficient and yet even as we speak sunlight, water and clean air are joining crude oil as scarce commodities.
Jamaica has abundant natural resources, we owe it to ourselves to take the time to develop industries that can support the national infrastructure in the long term. Hoarding foreign currency and exchanging over and over again is defeating any national objective being pursued.
Maximising resources for the basis of gains/profits will neither help you or the nation at large in the long run. The nation of Israel while walking through the wilderness to the promise land was warned to take only enough manna for their immediate needs. Those who disobeyed discovered that greed did not pay, for the left over manna bred worm and began to stink.
Jamaica is not poor economically, like most countries it’s the practices which surround distributing the wealth of the country that continues to throw the community into perpetual chaos. Greedy Jamaicans/speculators need to be reminded that we have brought nothing into this world and neither can we carry anything out.
To the wealthy and those who have much and don’t know what to do with it, you are reminded that who is given much, much is expected. Reaping where you did not sow and gathering where you did not winnow, will bring great shame upon yourself and leave a nation of people enraged. Proverbs 28:8 reminds us that he who increases his wealth by interests or usury…shall leave it to him who is kind to the poor.
About the Writer, Philip Dinham
Phil Dinham is a member of our Jamaica prime time news team. He remains a Jamaican citizen in Ft lauderdale, United States where he is studying Hospitality and Tourism management at broward community college. Philip is a certified media professional with over six years of experience in formal media relations and radio broadcasting. Comment on this article and all Jamaica Prime Time presentations by writing respective authors at [email protected]