By LUCIUS C WHITE

Jamaica is among the most highly indebted nations in the world, if indebtedness is measured against the nation’s Gross Domestic Product (GDP). Currently, our debt stands at somewhere in the order of 140 per cent of GDP. This untenable position was not attained in one quantum leap but by measured steps over many years. There can be no denying that the pace has been accelerated in the last two years since the debt moved from $900 million to in excess of $1.5 billion, a growth of 66.6 per cent in that very short period.

For the record, we have not had any natural disasters such as hurricanes or earthquake of any noteworthy magnitude in the period. With the debt as high as it is and the cost of servicing the debt taking 64 cents out of every dollar of revenue collected, the government panicked. They sought to reduce the cost of servicing the debt by reneging on the terms and conditions of bonds held by local institutions and individuals.

After calling in of the bonds, along with threats of punishment for those who did not accede to the demand to exchange their legal bonds for new bonds to be issued with new conditions arbitrarily set by the government, it was announced that some 99 per cent of the bond holders “voluntarily” accepted the government’s JDX plan. It is interesting to note that it is the government that has described the bond holder’s participation as “voluntary”. Listening to the bond holders who described their ordeal of their brokers calling them and giving them, in one mentioned case; 24 hours to sign or run the risk of losing the principal investment, it is realized that those were the only options available.

One could not associate the word voluntary with the aforementioned circumstances. More correctly, words such as Coerced, Blackmailed, Extorted, Deceived and Signing Under Duress – any of the foregoing seem more befitting than voluntary.

I am among those who feel the government’s action is illegal, immoral and unconstitutional. It will be allowed to stand only for as long as it remains unchallenged. The government and its apologists have been saying they had no choice as the debt servicing was unsustainable at the committed interest rates. Let us imagine a group of customers of one the stores offering hire purchase should one day march down to the store and say to the manger, “We find we are using too much of our salaries to service our debt to you . You must hand over the agreement we have with you and you must sign this new agreement which we have prepared with terms more affordable to us. Let us warn you, if you do not agree to our term, we cannot assure you of any further payments and we will be making sure things get rough for you in whatever way we can”. Would not the store manager have a right to call the police for protection? If the manger feels threatened at the time and signs the agreement prepared by his debtor, could anyone of sound mind who speaks English or any derivative of the language call that transaction a voluntary one?

When the holders of the three most powerful offices in finance in the country (the Prime Minister, the Minister of Finance and the Governor of the Bank of Jamaica) issued what most people would readily describe as threats of punitive nature to be applied to those who fail to exchange their bonds for the new bonds issued by the government, it is very clear they were not voluntarily making patriotic sacrifices. The following question must be honestly asked: on what basis is the JDX a legal transaction? I would love some one to explain the difference between what an extortionist does with his gun to get money not owed to him and what a government does with the threat of punitive legislative act so as not to pay money owed by that government? The difference is the tool used for the act. The extortionists use guns/ the sword and the government uses the pen. This confirms the saying that “the pen is mightier than the sword”. To deprive victims of $40 billion using guns/the sword, would take an awful lot of doing. Yet, in one fell swoop, those with the power of the pen deprived bond holders of $40 billion of their wealth without pretending to have done so by taxation.

It is disgraceful that pensioners and others whose thrift allowed them to make their money available to the government of Jamaica in the government’s hour of need, that those people should be deprived of that to which they are legally entitled because some in authority think these people are “RICH”. The envious among us see nothing wrong because according them, many years of sweets preceded the government’s precarious position and decision to “do something” The government’s position is that “We are committed to a low interest rate policy and this is a part of that strategy; this how it is”. In pursuit of that objective, the constitutional requirement to honour debt as a first charge on the consolidated fund has been a causality. As a nation, we ignore this violation of the constitution to our peril.

In all that is going on, a very important principle has escaped the attention of the policy makers. When borrowed money is not used to increase or enhance production, your debt will increase. Regardless of the justification proffered, if we are using borrowed money for the fixing of potholes we are getting deeper in debt. At this point, such a move may create the illusion of something happening for the people but what is really happening is that the nation is drowning in debt. The continued practice to commit expenditures beyond our revenue and to fund the deficit by loans both local and foreign is a recipe for pauperizing the nation.

If nobody takes time out to see that loans are utilized for the growth of production and or enhancing productivity, at the end of the day we will be poorer.

Loans procured for the improvement in education and training of our workforce must be classified as medium to long term investment and in time such loans will pay for themselves from the increased productivity that is associated with educated and trained labour. To borrow money to fix potholes in our roads is like unto a man who was heavily in debt to the point where as much as 65 per cent of his wages was being used to pay his bills.

It was recognized that the house needed to be painted so he got a raise from his boss with a commitment that the raise would be used to paint the house. After a few months of using the raise to paint the house, the man went out and got another loan so that he could paint the house faster.  He begins to use his raise he had received to service the new loan so he congratulates himself for his creative financing of the project of painting the house. Then a few months later he marvels that his debt was greater than before he got the raise from his boss.

In the aforementioned story, if we make taxpayers “the Boss”, I invite readers to name the man. Why do we marvel at our indebtedness when we celebrate receiving loans to do the equivalent of painting our homes?  We choose to borrow rather than to paint it from the raise that was given by the boss? When the loan is in foreign exchange as this last one is, our repayment problem must be made more difficult, but why worry? When the debt servicing cost reaches the level of repugnance (which will be determined by the Prime Minister, the Minister of Finance and the Governor of the Bank of Jamaica) there will be another “voluntary debt exchange”. JDX 2 will come to the rescue.