Wage demands threaten debt exchange gains

The Jamaica Teachers’ Association (JTA) must be in another world. Last week media reports indicated that the teachers’ union was preparing its two-year wage claim for Government.

This, when the International Monetary Fund is on the verge of signing a 27-month stand-by agreement with the Jamaican Government. The agreement calls for, among other things, the freezing of public sector expenses which by extension includes salaries.  Also, as part of budgetary constraints, the Government has announced that the allocation for tertiary education will remain at 2009/2010 levels, which means it’s likely that tuition fees for students at the University of Technology, and the University of the West Indies are likely to go up.  The prospect of this prompted UWI students to demonstrate preemptively last week.

So against this background, I view the move by the JTA at puzzling. Is the JTA not part of the discussions the Government has held with the Jamaica Confederation of Trade Unions under the memorandum of understanding?

Paying the JTA and other public sector employees higher wages will only  reverse the gains of the Jamaica Debt Exchange programme and push the Government to borrow from the local market at increased rates; so we’ll be back at square one.

It is, therefore,  critical for Government to keep inflation low in order to discourage pressures for increased wages. This means keeping the foreign exchange rate stable, as well as being prepared to roll back the latest petrol tax if the price of oil rises significantly on the international market. Government should also tread carefully in the proposed increase of property taxes and user fees in government agencies.

Warning: if inflation rises significantly, then local investors will begin to demand higher returns on their investment income. We’ll be back at square one.

What say you?

Universal brotherhood on display

It takes a natural disaster of catastrophic proportion, like the 7.0 magnitude earthquake in the Caribbean nation of Haiti, to see the display of human kindness and brotherhood by people from all across the globe.
Jamaicans, Americans, Canadians French, Brazilians, Iranians, Israelis, Russians and many other nationals came to the rescue of the Haitian people in their hour of need.
Regrettably, the United Nations mission in Haiti lost their two top leaders as a result of the earthquake, but they would be please that the rescue response has been a truly a “united effort”.
The USA, being the most resource-rich country in the region and despite its own economic difficulties, commendably took the lead in the rescue mission. The US milltary machinery is doing what the rest of the world prefers to see it do –being a friendly neighbour, and using gifts of kindness rather than weapons of warfare.
Jamaica, as a member of the Caribbean Community (CARICOM) group of nations, must be congratulated for leading the regional response in Haiti.
Jamaica Defence Force soldiers, Jamaican fire fighters and medical crews, along with journalists, have been playing their part in helping the Hitian people through this difficult period. Jamaican Prime Minister, Bruce Golding met with US Secretary of State Hillary Clinton during a brief visit to Jamaica en route from Haiti. Former Jamaican Prime Minister Percival Patterson nas been named to represent CARICOM on a hemispheric committee to oversee Haiti’s recovery.
In addition, to the willingnes of countries to assist Haiti, stories abound of personal kindness and acts of herorism on the part of rescuers.
So the worst in natural forces has brought out the best in human nature.

No celebration over debt exchange

Sorry, I am not yet ready to pop the champagne over the Jamaican government’s decision to swap $40 billion in interest payment on domestic debt instruments.
In fact, based on the comments from bankers, they are grinning and bearing the debt exchange in the hope that the Bruce Golding-led government follows through on the other critical components of macroeconomic policies such as controlling spending, collecting taxes more efficiently and growing the economy.
So far, it is the people of Jamaica, the investment community -including pension scheme members, who must be commended for their willingness to sacrifice some of the interest payments initially promised to them by government. The extent of this sacrifice is underscored by the fact that many of these investors have recently been hit with sharp increases in petrol prices and other goods and services such as public transportation fares.
I am holding back the celebration until micro, small amd medium sized businesses start receiving low interest loans from banks, and goverment removes the red tape to free private enterprise. That’s the most sustainable way for government to increase its revenue inflrow –growing the tax base.
Now that government paper will soon not be the biggest game in town, it is hoped that banks will shift their focus to supporting productive enterprise. It won’t be easy in the short term to accept lower levels of profitability after years of super profits from investing in government papers. But by weaning themselves off these, banks will widen their income base and, in the end, become healthier. That will be a fine  time for celebration.

That’s my view. What’s yours?

Byron Buckley

PS: My prayers for the people of Haiti. The global community must be commended for the humanitarian response.