Waking Jamaica's industrial
sector
...with a successful end
to the financial crisis on the horizon and increased confidence
from the business sector, Jamaica's Finance Minister, Dr Omar
Davis prepares the economy for global competition.
As the political flagship
of the Caribbean Basin, much of what Caricom and the grouping
of ACP countries have achieved in its quest to influence economic
and foreign policies around the world, have been done under the
leadership or strong advocacy initiatives of Jamaica.
Considered by residents to
be the pride of the Caribbean, Jamaica has traditionally distinguished
itself by its economic and cultural diversity, but this pride
has made it one of the most difficult economies and societies
to manage.
And, although it is one of
the largest economies in the Caribbean Basin, the country's dependence
on tourism, agricultural cash crops and mining, has made it increasingly
vulnerable to changes in the international commodities markets.
Lower prices for exports
of sugar cane, bauxite and aluminium, the United States challenge
of the European Union's Banana Regime and the collapse of Far
East economies in the mid 1990's, have made it even more difficult
to finance the country's economic restructuring programme.
This has made the decade
of the 1990's extremely difficult as the country braced for a
unique combination of economic problems, including hyper-inflation,
a crisis in the financial sector, unstable exchange rates, low
or negative growth rates and an erosion of much of the economic
gains that was achieved since independence from Great Britain.
Every strategy proposed,
seemed to have a cure that was tougher to take than the country's
economic ills. Yet, everyone agreed that something needed to be
done.
No one agreed more than university
lecturer, former Director of the Planning Institute of Jamaica,
and current Finance Minister, Hon. Dr Omar Davis.
Unlike other critics, Davis
had a plan, and as the conductor of a complicated orchestra of
economic players, he has seen more than his share of disappointments
as he stuck to proven strategies for restructuring the country's
floundering economy.
And, after six years at the
helm, his work is beginning to bear fruit. There are clear signs
that the country's economic fortunes are turning, and his hard-nosed
plan to get the economy into shape is beginning to reap rewards.
With a consistent policy
of maintaining a tight fiscal and money supply regime, the economy
has started to stabilize with significant reductions in inflation.
The budget deficit has also been reduced from 7.5% of GDP in 1998
to 4.5% in 1999. For the present fiscal year the target is a balanced
budget, with small surpluses of 1.0% of GDP in 2001 and 2.0% in
2002 respectively.
"The relatively modest
surpluses for the last 2 years of our medium-term plans have been
included because the capital budget has suffered greatly in order
for us to achieve our fiscal targets," says Davis.
"This was true in the
1999/2000 fiscal period and it will be equally so this fiscal
year. If we are to retain the confidence of creditors both at
home and abroad, we have no option but to maintain our fiscal
restraint," he adds.
Easy access to foreign loans
in the past have contributed to the Jamaica's high debt problems,
and he sees controlling debt servicing obligations as a key factor
in turning around the economy. Since 1995, significant strides
have been made to stabilize and slow the growth of the national
debt.
At the end of fiscal year
1989/1990, external debt was 142% of GDP. At the end of fiscal
year 1999/2000 this was reduced to 48% of GDP. In terms of priorities,
the major challenge facing the Administration is to continue this
trend. In the medium-term Government will resist the urge to borrow
from the domestic market and it has carved out a strategy to substantially
reduce its external debt servicing.
This year, no significant
increase to the debt stock is anticipated from Central Government
operations and the Administration plans to approach the domestic
market for J$28 billion less than the previous financial year.
This reduction in the Government's
participation in the domestic market should also have a positive
impact on interest rates.
Davis said he would approach
the external capital market for US$400 million to rollover the
current debt and meet servicing requirements so the economy could
have some breathing space to grow.
And growth is what he is
preparing for the economy, as he sees stagflation and a lack of
confidence in an economic future as the main problems for the
country to overcome.
"Despite all that we
have been through, there is good reason for confidence,"
he says, "the sharp turn-around in the financial sector in
1999 was an important signal of opportunities for the future.
Additionally, the attainment of the fiscal target for 1999/2000
and the explicit commitment to a balanced budget in this fiscal
year, provide strong reasons for confidence amongst creditors
both at home and abroad."