ON July 23, Jamaica raised US$2 billion on the international capital market through the issue of two new eurobonds. US$1.35 billion will mature in April 2028 and US$650 million will mature in July 2045.
US$1.5 billion is to be used to purchase US$3.2 billion in debt owed to state-owned Venezuelan oil company Petroleos de Venezuela SA by Jamaica's PetroCaribe Development Fund. This is a discount of 54 per cent. The rest of the funds will be used for budget financing.
The discount is sufficient to provide relief, although more expensive debt is being substituted for less expensive debt in terms of interest rates. First, the principal has been reduced by more than a half. Second, the repayment has been postponed until 2045. The PetroCribe debt is due payment instalments, beginning in this fiscal year.
Third, there will be an estimated reduction in the debt/GDP ratio from 137 per cent to 125 per cent by the end of the next fiscal year in March 2016.
Fourth, the 2015/16 budget is now fully financed, hence no need to borrow on the local capital market or to raise more tax revenue. Fifth, it provides an injection of foreign exchange that will contribute to stabilising the exchange rate during the low season in tourism.
Sixth, all of these benefits will occur without any direct adverse impact on the primary surplus, as that target does not include interest payments. Seventh, in conjunction with the funds from the Inter-American Development Bank approved last week, there will be no problem with the J$62 billion due in February 2016 as part of the National Debt Exchange in 2013.
The term 'Opposition', used in the Constitution and in common political parlance, refers to the political party with the second-largest number of seats in the House of Representatives. In a well-functioning democracy, this provides for views other than those of the Government to be voiced in Parliament and to the public.
The party designated as the Opposition should not take the title literally and oppose every decision and policy of the Government. Unfortunately, the current Jamaica Labour Party (JLP) is guilty of this foolish approach.
The leadership has adopted this approach to the financing and debt-reduction actions of the Government. Mr Audley Shaw has asked why did the Government not use less-expensive funds from the multilateral financial institutions and achieve even more savings. This was a reasonable question with the answer having to do with the availability of such funding from these institutions and how quickly this could be arranged, since it is outside of the current financial limits of the IMF-led programme.
That was useful, but subsequently the JLP has criticised the entire endeavour.
Presumably, this approach was on the advice of the JLP's economic team. Happily for Jamaica, they are not in charge of the country's economic policy. We don't believe that Mr Andrew Holness does not understand economic issues. However, he needs to get a new and competent team of economic advisors.jamaicaobserver
US$1.5 billion is to be used to purchase US$3.2 billion in debt owed to state-owned Venezuelan oil company Petroleos de Venezuela SA by Jamaica's PetroCaribe Development Fund. This is a discount of 54 per cent. The rest of the funds will be used for budget financing.
The discount is sufficient to provide relief, although more expensive debt is being substituted for less expensive debt in terms of interest rates. First, the principal has been reduced by more than a half. Second, the repayment has been postponed until 2045. The PetroCribe debt is due payment instalments, beginning in this fiscal year.
Third, there will be an estimated reduction in the debt/GDP ratio from 137 per cent to 125 per cent by the end of the next fiscal year in March 2016.
Fourth, the 2015/16 budget is now fully financed, hence no need to borrow on the local capital market or to raise more tax revenue. Fifth, it provides an injection of foreign exchange that will contribute to stabilising the exchange rate during the low season in tourism.
Sixth, all of these benefits will occur without any direct adverse impact on the primary surplus, as that target does not include interest payments. Seventh, in conjunction with the funds from the Inter-American Development Bank approved last week, there will be no problem with the J$62 billion due in February 2016 as part of the National Debt Exchange in 2013.
The term 'Opposition', used in the Constitution and in common political parlance, refers to the political party with the second-largest number of seats in the House of Representatives. In a well-functioning democracy, this provides for views other than those of the Government to be voiced in Parliament and to the public.
The party designated as the Opposition should not take the title literally and oppose every decision and policy of the Government. Unfortunately, the current Jamaica Labour Party (JLP) is guilty of this foolish approach.
The leadership has adopted this approach to the financing and debt-reduction actions of the Government. Mr Audley Shaw has asked why did the Government not use less-expensive funds from the multilateral financial institutions and achieve even more savings. This was a reasonable question with the answer having to do with the availability of such funding from these institutions and how quickly this could be arranged, since it is outside of the current financial limits of the IMF-led programme.
That was useful, but subsequently the JLP has criticised the entire endeavour.
Presumably, this approach was on the advice of the JLP's economic team. Happily for Jamaica, they are not in charge of the country's economic policy. We don't believe that Mr Andrew Holness does not understand economic issues. However, he needs to get a new and competent team of economic advisors.jamaicaobserver
