IMF official outlines positives of debt reduction

IMF official outlines positives of debt reduction

Thursday, February 14, 2019

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INTERNATIONAL Monetary Fund (IMF) representative to Jamaica, Dr Constant Lonkeng Ngouana, says that as Jamaica’s debt is reduced, more money will become available to invest for the development of the country.

Speaking at a meeting of the Rotary Club of Kingston East and Port Royal at Eden Gardens Wellness and Spa in Kingston on Monday, Dr Ngouana pointed out that reduced debt will also lead to increased investor trust.

“Jamaica was paying something like 500 basis points above other emerging markets in terms of how much the market was charging Jamaica [for loans]. Today, when Jamaica wants to borrow, they charge 150 basis points below the emerging market,” he noted.

Jamaica has made significant progress in reducing its debt from 147 per cent of gross domestic product (GDP), and is projected to fall below 100 per cent by the end of the current fiscal year in March.

Dr Ngouana also said that the less Jamaica pays for interest, the more money will become available to fight crime and invest in education.

“That’s what it is all about. So, it’s not just reducing public debt for the sake of it; this is reducing public debt to open up fiscal space to fund all the beautiful things that you can think of – roads, hospitals and so on,” he explained.

“You also want to lower debt because in bad times, when you have those disasters, you want the Government to have fiscal space… to assist the citizens the way it should,” he added.

Dr Ngouana, at the same time, said if Jamaica were to bring its murder rate “to the world average, GDP [would] grow by 0.4 per cent every year”.

“Putting things into perspective, the average growth rate of Jamaica since 2013 has been 0.9 per cent, so this is half the GDP growth of Jamaica over the time frame. This is not a small number by any stretch of the imagination. So, fighting crime is certainly one area of priority,” he said.

He also reiterated the need for public-sector transformation, noting that a more efficient public sector will facilitate the private sector, by allowing the resources to flow to growth-inducing areas.

“It also means that the wage bill has to come down. The Government has some plans in terms of redefining where it ought to be involved… and for public bodies, the Government is deciding to either divest, merge them or simply reintegrate them in their line ministry to avoid so many different entities,” Dr Ngouana said.

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