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.