Mortgaged sovereignty
Published:Friday | January 21, 2011 | 12:00 AM
Audley Shaw should consider debt therapy. For he seems in danger of emulating predecessor Omar Davies, whose quest for timely money flows led to a lovefest with the debt market.
To be sure, Shaw's indiscretion seems minor - only J$7.6 billion of overborrowing that showed up in the November accounts. But he has been overshooting since June. So better to confess the sin and atone for it now.
Better to reflect on the wisdom of parking liabilities on the country's balance sheet that have no current purpose, but with a future cost on tax-payers. And if there is prudence in the opaque, by all means declare it.
JDX or not, the national debt has grown by half a trillion dollars - that's a five and eleven zeros - since Shaw has been finance minister; J$140 billion in 2010 alone, with December's numbers still to be counted.
The country is now in hock for J$1.5 trillion, not counting IMF debt.
Interest payments are already running at J$142 billion per year, so it is not an area that needs to grow.
GDP does not mean 'gross debt plunges'.
To be sure, the debt dilemma is inherited. But that argument will find no sympathetic ear three years in, especially when some of the same behaviours have straddled administrations.
Davies never quite said so, but managed anyway to convey the impression that he saw himself as an efficient manager of Jamaica's fiscal affairs.
But a deficit hawk, he was not.
He taxed and he spent, leaving J$1 trillion of debt, depleted foreign reserves and no funds in the kitty, forcing Jamaica to mortgage its sovereignty to the IMF for the tools to chip away at the liability.
Shaw's overborrowing last year - that at November gave him a bottom line cushion of close to J$5 billion after all expenses, including debt redemptions — happened even as he was about to blindside businesses with new sin taxes. The irony.
Shaw collected J$1.7 billion more taxes than anticipated in the April-November period, but he also reported that it cost J$15 billion less than budgeted to run the country.
You could call him a cost-cutting guru, but it's just as easy to conclude that he judged poorly on what it would take to keep government humming.
And if his cuts were so effective as to contain the country's operating deficit to J$6.3 billion per month versus the J$8.3 billion around which the budget was crafted—it's even harder to justify why he needed that extra J$7 billion.
Shaw is riding high on his JDX success, but the savings it is constructed to deliver in the years ahead will erode if Government does not tame its instinct for debt.
So a history lesson is in order.
Davies committed the country and/or signed off on contracts that turned out not to be so great for the very public purse he was constitutionally bound as keeper and as defender against the fiscally imprudent, all in the search for cash to finance an over-leveraged public service.
He, too, was known to over-borrow.
- Lavern Clarke