Building a Better Jamaica

I have asked the financial institutions for their full support. Tonight, I ask for the support of the individual bondholders – the businessman, individual investor, the pensioner who have invested in these bonds. You have earned good returns on these bonds up to now. Tonight, I am asking you to share the burden that must be borne at this critical juncture in our journey through this unprecedented period of crisis. The interest rate you will earn on the new bonds is still better than can be earned anywhere else in the world but your acceptance of these new bonds will make a huge contribution to a brighter future in which Jamaica will have another chance to position itself among the fast-growing emerging economies of the world.

I am encouraged and strengthened by the firm commitments that have already been made to the programme by some of the major bondholders. I thank them for their bold effort; I thank them for their significant investment in Jamaica’s future. I urge all institutions and bondholders to join us in this national effort. On the success of this venture depends the approval of our programme by the IMF and the funding that has already been authorized by the IDB and World Bank. We cannot afford to fail.

Are there downside risks? Yes, there are. Rating agencies could possibly further downgrade our bonds because by their very nature they react unfavourably to any change in the terms of those bonds, even if they are voluntarily executed. That may be the price we must pay to do what we must do. Other countries like Turkey, Uruguay and Argentina have pursued not dissimilar strategies and before long they not only recovered but surpassed their best previous ratings.

Of significance is the fact that this Debt Exchange Programme applies only to our local debt. It does not affect our external debt which is far less burdensome in terms of its interest rates.
This Debt Exchange Programme cannot and does not stand alone. It is part – a critical part – of a much more elaborate programme to correct the long-standing, systemic weaknesses in our fiscal and economic management that have prevented us from moving forward, from growing even in times of global economic boom when almost every other country was growing.

The current crisis has forced us to turn to the IMF and the other multilateral institutions for help. This is vitally necessary to plug the hole resulting from the drop in foreign exchange flows and the fall-off in our revenues. Without that help, the exchange rate would fly through the roof and the cost of living would go on fast rapid; without that help, we would not be able to meet our bills – essential government services would have to be shut down. It would lead to a catastrophe that is beyond description. The IMF, World Bank, IDB and Caribbean Development Bank have collaborated to provide us with US$2.4 billion over the next 27 months. A half of that will be released over the next few months once the IMF programme is approved. This will ensure that the dollar remains stable, that inflation is kept low, that the new lower interest rate regime that will emerge after the Debt Exchange is sustained over the long term and that those rates will go down even further.

What are the critical elements of this programme?

We must control our expenditure; we must cut our cloth to fit our suit. The Debt Exchange Programme will save us $40 billion a year in expenditure. The public sector wage bill will be frozen over the next two years. We have made provisions for retroactive payments due to teachers and the reclassification of nurses and other health sector workers but these cannot be paid at one time; they will have to be spread over the next few years.

The Public Sector Transformation Unit is working vigorously on the programme to reduce the size and cost of government and we will start implementing these changes in the new financial year. Some agencies and departments will be merged, cost management centres identified, responsibility and authority more closely aligned and performance targets and measurement established to ensure greater efficiency at lower cost.

Travel expenses, purchases of goods and services, utility bills must all be reduced to specified levels.

Ministries and agencies will be required to report on a monthly basis all outstanding bills and commitments so there is no build up in arrears that can eventually throw the budget out of line.
Waivers will be drastically curtailed. All existing incentives will be reviewed and where they are no longer necessary, they will be withdrawn.

The Central Treasury Management System will be established to bring all of government’s financial resources under central management to ensure better utilization. Would you believe that many times the government is borrowing money at 20-odd per cent when it has huge sums of money sitting down somewhere, sometimes earning little or no interest?

Implementation of the Tax Administration Programme will be accelerated. No, I don’t mean more GCT or more gas tax. You have had enough of those! I did already indicate that adjustments will be made in property taxes because they are woefully outdated. Some persons, for example, living on expensive property, are paying little more than a pittance for property tax. All property tax collections go to fund local services such as solid waste management and street lighting and what is being collected now is insufficient to pay those bills so we have to find money out of the budget to pay JPSCo and the Solid Waste Management Authority. We cannot do that anymore so, come April 1st, adjustments will be made to ensure that those monies can be found. The level of adjustments will be tempered by an aggressive drive to collect property tax from those who have not been paying. We are

There are some user fees that will have to be adjusted. I give you an example. There are certain documents that have to be stamped at the Courts Office for which the fees are as low as 20 cents! That was set from the days when 20 cents was two shillings. Those will have to be adjusted to something sensible. going to get tough. We will use our powers to advertise for sale those properties whose owners refuse to pay their tax.

The main focus of the Tax Administration Programme will be enforcement and collection. People who owe taxes must pay their taxes! It is more TAXES we want – not more TAXATION!
Fiscal burdens that have worn down the budget will be removed.

We have improved efficiencies at the JUTC but bus fares will have to be increased to reduce the losses even further and lessen the burden on the budget.