The economy of a nation is similar in many ways to that of a household. As such, there are certain basic rules that must be followed if it is to operate properly. The most basic of these is that you cannot spend more than is earned. If this is done you are said to be ‘living above your means’and over any extended period of time there are certain problems that are bound to arise. To fund the excess expenditure one must resort to begging, selling assets that  have been accumulated in the past, taking money from your saving, borrowing, and in some extreme case stealing and other dishonest means. The fourth means, that of borrowing is by far the most common. Unlike the other means, however, this funding will have to pay back over an agreed period of time and usually with interest. This is where a lot of people find themselves in trouble as they are not able to repay the fund that was borrowed. In this case the person can seek to renegotiate the terms of the loan, default (not pay up ) or seek to borrow from another source to pay the debt (borrow from Peter to pay Paul ). The process of ‘borrowing from Peter to pay Paul’ can be repeated a number of times and usually the terms of such loans become increasingly difficult.  If a part of these loans are used to fund income generating ventures, then this income can be used to repay the loan and help meet expenditure shortfall. On the other hand if this money is used only for house keeping purposes such as paying  bills, example phone and light, and buying food,  the economic state of the household will worsen leading to the point where there is just no one left to borrow from. At such time we can say that the person is now bankrupt as he is no longer able to pay his debt. The best thing to do is to cut back on
the expenditure to bring it in line with the income of the household. This will result in a fall in the standard of living as some things will have to be given up such as the motor car, the cable television service or some other amenities. The economic management of a country, in a general way, operates along the same principle as that of the household. This will help us to clearly understand the economic state which the country is in, how we got where we are and how we can get out. The first thing to do is to work out a budget. The household income is derived from the wages and other sources of income such as the interest paid on savings of the household members. With its income, the household pay its bills which include utilities, credit cards and payment on any loan obtained. Services such as gardening and legal service will have to be paid for if required. Also goods such as food, clothing and other supplies will have to be purchased. Any excess income can be put aside as saving. At times it is necessary to revise the
budget as an expenditure planned for may no longer be necessary or one not planned for could arise. In this case it might be necessary to put off some expenditure or resort to borrowing if additional funds are needed and it cannot be found from within the household from savings etc. Similarly the income of the country is derived from the taxes it collects and well as service charges such as stamp duty. The
country must meet all its obligations from the money it collects in taxes and service charges. There are many obligations of the government such as the provision of health, education and security, the repair and building of roads, schools and other infrastructure plus the payment of salaries to government employees. To do this the government goes through what is called the budget exercise in which the programmes to be undertaken for the budgeted year is decided and funding for them are identified.  During this exercise
the cabinet members meet and identified all the things that need to be done and the amount of money that is available from taxes, service charges and loans. When this is done the budget is then presented to the country by the finance minister after which the cabinet members will announce how the money allotted to their ministry will be spent. It is under the various ministries that the programmes agreed to by the cabinet will be carried out. If the total expenditure is equal to the revenue expected to be collected, the
budget is said to be balanced. If the revenue expected to be collected is less than the amount to be spent there is said to be a budget deficit while if it is more, there is said to have a budget surplus.
During the financial year the budget may be modified due to a short fall in the revenue collected or the need to undertake other programmes that were not planned or budgeted for. In this case the budget will be modified and a modification to the budget called the supplementary estimate will be presented to the country. This can be done any number of times and is referred to as the first, second or third supplementary estimate depending on which revision it is. If addition revenue is needed this is usually found by cutting some of the programmes and redirecting the funds allotted, introducing new taxes or resort to borrowing funds. In some case the government resorts to literally printing the additional money that is needed to balance the budget. This always cause inflation as there is now more money chasing the same amount of goods and services. 
To fully understand what is happening in our country, there are three terms that must be clearly   understood. These are the Gross Domestic Product  ( GDP ), Gross National Product ( GNP ) and Net International Reserve ( NIR ). The GDP is the total valve of all goods and services produced in the country throughout that year. GNP is similar to GDP but it also includes goods and services produced by the country’s nationals overseas. Most countries use GDP as a measure of the economic activities of the country. The growth of the country is determined by comparing the GDP in one year to that of the previous year. If it is greater, there is said to be positive growth and is usually given as a percentage while if it is negative there is said to be negative growth and this too is usually given as a percentage. The NIR is the foreign exchange that the country has as savings for use in any budgetary shortfall, emergency situation or to support the local currency against devaluation. 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 nineteen nineties 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.

Consequences

The country is saddled with a huge national debt which has grown from about eight and a half billion dollars (US$) in the year 2000 to a maximum of twenty two billion in 2012 and has since declined to fifteen billion dollars at present. That is from 92% of GDP to 146% of GDP and  then declined to 95% of GDP.  This debt burden means that a very large sum is being paid to service the debt. Most of the money borrowed has been 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 government has resorted to floating bonds.   This is a process whereby the government takes money from people for a period of time,  with a promise to pay an agreed interest at the end of this 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 referred to as differed financing and this cost must be put on the budget at some later date.
The borrowing by the government on the local market has increase the demand for loans. This means that the government is competing with other local borrowers such as manufacturers and  developers. This increases the interest rate and the national debt and force manufacturers and other borrowers out of the market. Manufacturers were now unable to retool their factory to compete with imports or establish a presence in the international market. As exports in all sectors declined and imports raise the shortage of foreign exchange become more acute. The demand for foreign exchange is now greater and the supply is less.  We now have a greater amount of local currency chasing a smaller amount of foreign exchange. As with all things,  their price goes up when there is a shortage thus it will now take more local dollars to buy the same amount of foreign exchange resulting in a devaluation.  The government attempt to prevent this devaluation by decreasing the amount of local currency available to purchase foreign exchange. This it does by putting LRS and REPO’s on the market to ‘dry up’ liquidity. In this case the BOJ will take this money on deposit at high interest rate for a specific period of time and lock this money away to keep it out of circulation. This money does not contribute to the development of the economy in any way.  When these instruments mature, the money goes back into circulation along with the huge amount added for interest payment. For example if one million dollars is put on deposit for one year at 10%, one million plus one hundred thousands dollars will be put back into circulation at the end of this period.  The government
then put out more instruments to keep the previous deposits plus the interest paid on them out of circulation and the cycle keep repeating successively getting worst for the taxpayers as the interest paid on these instruments is done from the budget. The banks and other financial institutions must compete with the government for this deposit and must match the interest being paid by the BOJ thereby forcing up the interest rate further as they must now lend at a higher interest rate to their borrowers in order to pay their depositors and cover their expenses. The people will find it more attractive to save their money rather than purchasing goods or foreign exchange thus decreasing the demand for foreign exchange.
The value of the local currency is determined by  the availability of foreign exchange and the demand for it. The value of the Jamaican dollar is kept at the desired level by various means such as  REPO’s, LRS, high interest rates and borrowing. If care is not taken it could eventually lead to the collapse of the country’s economy and the bankruptcy of the nation.  Drying up liquidity, high interest rate and selling foreign exchange from the NIR into the market are designed to be short term measures to deal with a sudden ‘shock’ to the economy where it becomes necessary to cut down the demand for foreign exchange as might be the case where the foreign exchange earned from tourism to drastically decrease.
Devaluation of a country’s currency is never the popular thing to do as it always produce inflation causing an increase in the prices of goods and services which impact on everyone especially the poorer class. This is so as it will now take more Jamaican dollars to buy imported goods, local goods with imported components and other cost such as transportation and electricity.  When the dollar is devalued, the increase cost of foreign goods drive down the demand for these goods and therefore the demand for foreign exchange becomes less. At the same time it makes Jamaican exports more attractive as buyers need less foreign exchange to buy Jamaican goods. The country also become more attractive to tourists as they now get more local currency when they change their money to local currency.  The downside of devaluation is the increase in inflation causing a fall in the standard of living for most of the populace who
will now have to forego some of the things that they could previously afford. The upside to devaluation is that there is now less demand for foreign exchange, more attractive exports and a more attractive destination to tourists. This results in a more stable local dollar from which the country reap enormous benefits, as long and short term plans can now be made based on the stable value of the currency.         

Conclusions

Jamaica has ‘borrowed’ itself into the position that it is now in and we cannot borrow ourselves out of it. The government has been forced to make the tough decisions by our lenders and presently the country is on the road to recovery. It is unfair to leave this enormous amount of debt for our children, their children and grandchildren to repay when they will not benefit from the money borrowed. The plain fact is that we cannot continue to live off other people’s savings forever. Most of our imports are being bought with money borrowed and not with money that we earn.  There must be a drive to boost local production and to consume more local products. We need to realise that the cheap foreign imports will not be so cheap anymore once our local industries have been destroyed.  There must be a reorganization of the government  and the programmes that it offers. At the same time the wastage, theft and corruption in the government and all sector of the society must be eliminated. We will all benefit in the long run and we owe it to future generations.