THE JAMAICA ACTION PARTY
J A P
The Nation's Economy Con'td
Since the early nineteen seventies our NIR has been depleted and it was not until the late nineteen nineties that we
were able to build up any NIR which is recommended as the value of twelve weeks of imports. Unfortunately our NIR
is not as a result of earnings from export or services but from money which have been borrowed and on which we
are paying interest. This is similar to someone borrowing money from the bank paying interest on this money and
has it locked up in a vault at home in case it is needed.
Throughout the nineteen sixties to the mid nineteen seventies the economic growth was positive meaning that the
GDP each year was better than the year before. From the mid nineteen seventies through to the late nineteen
eighties, the economic growth of the country was negative meaning that the GDP each year was worst than that of
the year before. From the late nineteen eighties to the early nineteen nineties the economic growth was positive
then went negative again from the early to the late nineteen nineties then positive to the present time. During this
period of time the population of Jamaica has increase putting a greater demand on the country for goods and
services.
We have funded our lifestyle in part by the selling of assets that we have accumulated over the years both at home
and aboard. These includes overseas embassies and buildings, and locally entities such as JTC, JPS and more
recently the Sangster International Airport and the proposed sale of the Norman Manley International airport.
In the case of a private household, if the number of children increases and at the same time the income of the
breadwinners decrease it will be necessary to cut back on some things previously enjoyed thus cutting your
standard of living or borrow additional fund to continue living at the same standard that you usually do. The same is
true for the country. Faced with more people to provide for, and less and less resources, the country was faced
with two options. One was to cut back on the various programmes it supported as well as cut back on imports while
the other was to borrow the money needed to keep thing running as they were. The path chosen was to borrow
the money to maintain the present life style. This was done year after year, increasing the amount of money owed
by the country and making it successively more difficult to borrow and on more difficult terms. This borrowing was
done both from local sources as well as from overseas sources. This has now resulted in the country being at the
stage where the total revenue collected is less than half of the total budget. It has resulted in sixty seven percent of
the budget being used for debt servicing. This includes interest and principal payments to creditors. This sixty
seven percent, is of the total budget which includes the revenue collected plus all the loans borrowed to support the
budget. This debt servicing is fifty three billion dollars more than the total revenue collected.The two thousand and
three budget of 261 billion dollars is made up of 122 billion from tax revnue, about 10 billion from grants and 116
billion dollars from loans. This leaves a budget deficit of 13 billion dollars which may have to be made up by new
taxes and borrowing which would mean that the budget could be made up of up to 129 billion dollars from loans.
This mean that the entire revenue collected by the government is not enough to make the payments on the loans
already borrowed. The amount of money paid out to service the country’s debt represents almost one and a half
times the total revenue collected by the goverment.
Consequences
The country is now saddled with a huge national debt which has grown from about forty three billion dollars in
nineteen ninety one to over six hundred and thirty billion dollars at present and is increasing by several billion
dollars each month. This debt burden means that this year $464 million per day will be paid to service the debt with
interest amounting to $217 million. The debt to GDP ratio is 1.5 meaning that the debt is one and a half times the
value of all the goods and services produced in the country in a year. We are now borrowing money at higher
interest rate to pay off money that was borrowed years ago at much lower rates. That is we are now ‘borrowing from
Peter to pay Paul’. Most of the money borrowed is being used for house keeping expenses such as paying
teachers and not for infrastructural development which will enable us to earn income and help pay back the loans
borrowed.
In addition to its huge amount of borrowing the goverment has resorted to floating bonds. This is a process
whereby the government takes money from people with the promise to pay an agreed interest over a period of time
with a fixed amount to be paid at the end of this period. In some cases only a fixed amount is paid at the end of the
time period. The other means of finding funds is to make someone put up their own money to do a project with the
agreement that they will be paid at a later date. This is refered to as differed financing and must be put on the
budget at some later date.
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Since the early nineteen seventies our NIR has been depleted and it was not until the late nineteen nineties that we
were able to build up any NIR which is recommended as the value of twelve weeks of imports. Unfortunately our NIR
is not as a result of earnings from export or services but from money which have been borrowed and on which we
are paying interest. This is similar to someone borrowing money from the bank paying interest on this money and
has it locked up in a vault at home in case it is needed.
Throughout the nineteen sixties to the mid nineteen seventies the economic growth was positive meaning that the
GDP each year was better than the year before. From the mid nineteen seventies through to the late nineteen
eighties, the economic growth of the country was negative meaning that the GDP each year was worst than that of
the year before. From the late nineteen eighties to the early nineteen nineties the economic growth was positive
then went negative again from the early to the late nineteen nineties then positive to the present time. During this
period of time the population of Jamaica has increase putting a greater demand on the country for goods and
services.
We have funded our lifestyle in part by the selling of assets that we have accumulated over the years both at home
and aboard. These includes overseas embassies and buildings, and locally entities such as JTC, JPS and more
recently the Sangster International Airport and the proposed sale of the Norman Manley International airport.
In the case of a private household, if the number of children increases and at the same time the income of the
breadwinners decrease it will be necessary to cut back on some things previously enjoyed thus cutting your
standard of living or borrow additional fund to continue living at the same standard that you usually do. The same is
true for the country. Faced with more people to provide for, and less and less resources, the country was faced
with two options. One was to cut back on the various programmes it supported as well as cut back on imports while
the other was to borrow the money needed to keep thing running as they were. The path chosen was to borrow
the money to maintain the present life style. This was done year after year, increasing the amount of money owed
by the country and making it successively more difficult to borrow and on more difficult terms. This borrowing was
done both from local sources as well as from overseas sources. This has now resulted in the country being at the
stage where the total revenue collected is less than half of the total budget. It has resulted in sixty seven percent of
the budget being used for debt servicing. This includes interest and principal payments to creditors. This sixty
seven percent, is of the total budget which includes the revenue collected plus all the loans borrowed to support the
budget. This debt servicing is fifty three billion dollars more than the total revenue collected.The two thousand and
three budget of 261 billion dollars is made up of 122 billion from tax revnue, about 10 billion from grants and 116
billion dollars from loans. This leaves a budget deficit of 13 billion dollars which may have to be made up by new
taxes and borrowing which would mean that the budget could be made up of up to 129 billion dollars from loans.
This mean that the entire revenue collected by the government is not enough to make the payments on the loans
already borrowed. The amount of money paid out to service the country’s debt represents almost one and a half
times the total revenue collected by the goverment.
Consequences
The country is now saddled with a huge national debt which has grown from about forty three billion dollars in
nineteen ninety one to over six hundred and thirty billion dollars at present and is increasing by several billion
dollars each month. This debt burden means that this year $464 million per day will be paid to service the debt with
interest amounting to $217 million. The debt to GDP ratio is 1.5 meaning that the debt is one and a half times the
value of all the goods and services produced in the country in a year. We are now borrowing money at higher
interest rate to pay off money that was borrowed years ago at much lower rates. That is we are now ‘borrowing from
Peter to pay Paul’. Most of the money borrowed is being used for house keeping expenses such as paying
teachers and not for infrastructural development which will enable us to earn income and help pay back the loans
borrowed.
In addition to its huge amount of borrowing the goverment has resorted to floating bonds. This is a process
whereby the government takes money from people with the promise to pay an agreed interest over a period of time
with a fixed amount to be paid at the end of this period. In some cases only a fixed amount is paid at the end of the
time period. The other means of finding funds is to make someone put up their own money to do a project with the
agreement that they will be paid at a later date. This is refered to as differed financing and must be put on the
budget at some later date.
Page 1 2 3
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