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The Gleaner - June 26, 2000

 

From debt to growth? Davies has talks with World Bank, IADB and CDB

THE NEWS that Finance Minister Dr. Omar Davies has convinced the World Bank, Inter-American Development Bank and Caribbean Development Bank to put up US$325 million to help finance the Financial Sector Restructuring Company (FINSAC) has led to a focus on the increase in our debt and service costs.

This is a genuine concern. The final bill for bailing out the financial sector has conservatively been estimated at a net cost of some $50 billion. Hence, the repeated fears over the source of funds to bridge this gap and service the huge $108 billion FINSAC liabilities.

By accessing the multilaterals' cash, the equivalent of $13.6 billion, Dr. Davies has gone some way to start dealing with the question of building a sustainable financial sector in the medium to long term. He has given himself and the country time to adjust to the reality that in due course taxpayers will have to foot the bill.

He has also borrowed FINSAC and himself some amount of credibility, which is likely to be well received by a market that has so far been sceptical of the unorthodox trail the Finance Minister has blazed.

However, this latest agreement brings into context the dire need for growth in the economy. If the economy is not growing at a sizeable rate within the next few years, the multilaterals funds will not be the cash that helps solve our biggest conundrum but will become another noose around our necks.

The Private Sector Organisation of Jamaica (PSOJ) is forecasting little or no growth in Gross Domestic Product (GDP), somewhere between -1 and +1 in the current year. There are few that would openly suggest a more optimistic outlook.

It is on this inability and lack of focus on the most critical of Dr. Davies' challenges that he will ultimately be judged. His success in raising capital cannot be denied but his record on growth is dismal and remains his Achilles' heel.

 

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