EDITORIAL - Taxpayers must get value from debt

In fact, the central government runs reasonable primary surpluses. That is, it has a bit left over from taxes and grants after meeting housekeeping expenses, such as wages and salaries and basic programmes.

That surplus, unfortunately, is insufficient to either meet interest payment or amortise a national debt that was run up primarily by loss-making statutory agencies and other government institutions. FINSAC, the vehicle used by the Government to bail out the financial sector after the collapse of the 1990s, Air Jamaica, the Sugar Company of Jamaica and the National Water Commission were among the main culprits.

Indeed, a 2008 study by the think tank Caribbean Policy Research Institute noted: "That the absorption of liabilities from outside the central government is the root cause of the doubling of Jamaica's debt (between 1997 and 2003) puts Jamaica in a unique position within the Caribbean, where the six other countries that are heavily indebted all became so as a result of fiscal slippage - the failure to generate sufficient tax revenue to cover non-interest expenditure.

"Against the backdrop of these observations, there are two important policy imperatives for whoever forms the government after the December 29 general election. The first of these, to which the governing Jamaica Labour Party and the People's National Party say they are committed, is accelerating the divestment of loss-making enterprises, ensuring that, as happened with Air Jamaica, the losses of divested entities do not remain a burden to taxpayers."

investments to be undertaken

More important is a guarantee to taxpayers of a fair economic return for any money borrowed in their name. In other words, investments to be undertaken, especially with borrowed money, must be sound, and in congruence with the spirit and letter of the fiscal responsibility law, and must contribute to economic growth and national development. The returns should, insofar as practicable, cover the cost of the debt.

These undertakings, of course, are not outside the principles often, and loudly, espoused by Mr Audley Shaw, the finance minister. It is he who piloted updated fiscal-responsibility legislation.

That is why this newspaper was surprised at the revelation by the PNP's Dr Peter Phillips, during their debate last Thursday, of Mr Shaw's borrowing of J$11 billion from Commerzbank, apparently for the purchase of buses for the Government's loss-making transport company.

Even if Mr Shaw's insistence that the debt was cleared by the Cabinet and that he acted pre-emptively was true, the fact that he was taking on more debt for a bankrupt state company, without full ventilation of the issue, is worrying, especially in the face of the scandal over the Jamaica Development Infrastructure Programme. Moreover, purchasing new buses for the transit company flies in the face of that organisation's declared policy of refurbishing old ones at a fraction of the cost.

It is this newspaper's recommendation for the introduction, at once, of clear procedures, overseen by an independent board, for the review of public capital projects. This will not prevent the Government from proceeding with projects, but the public will know whether independent people believe they are justified.