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Dr Omar Davies fields questions on the economy
By Errol Gregory Business editor
Sunday, October 22, 2006
At the last finance minister's press conference held last week, Dr Davies was brimming with confidence as he commented on the economy's performance, and did not resile from answering the hard-hitting questions from his audience of mainly financial journalists.
On the worrying issue of government's borrowing that was $26B higher than projected, the minister explained that a contributory factor to government's high borrowing requirement was that one borrower - a commercial bank - that was privatised by government, exercised its option and asked for an early payout.
Government, he noted, had not anticipated this payment. Further, he added that government had not followed the usual practice of selling the proceeds of its most recent overseas bonds proceeds (US 250M) to the Central Bank. "These two factors explain the budget variance and the additional borrowing" he stated.
On the matter of the lower-than-targeted spending on the capital budget($5B less than budgeted) - the type of expenditure that stimulates development - Dr Davies argued that completion of projects was hampered by the cement crisis. He was assisted in answering this question by Financial Secretary Colin Bullock , who mentioned the high administrative costs associated with some projects and gave the assurance that spending on capital projects would pick up in this quarter.
Turning to the controversial matter of the provision that was put in the budget to fund public sector wage increases and the fact that the eventual wage settlements had exceed the figure, thus jeopardising our fiscal targets, the finance minister conceded that the wage bill target was overshot.
He stated however that the settlements would not cause a cash flow problem for his ministry as some of the promised increases would now come out of the current budget but would be carried over to the 2007-8 Fiscal year budget.
However the Minister stated that he would need more vibrant tax revenues to finance the government's wage bill. He said that he was very encouraged by the work of the tax department to date and took time out to praise the department for its efforts.
Asked to comment on the delay in establishing a Credit Bureau for the Small and Micro Business Sector, he explained that there was the somewhat thorny issue that the operators of the Credit Bureau would have to have access to the Tax Authorities Records. He said that this issue required more fine-tuning.
Journalists also used the occasion of Dr Davies' press conference to get an update on the stalled concessionary $600-m loan facility that had not moved because of a disagreement between BNS and the DBJ over spreads. While he stayed away from giving details of the settlement deal, he disclosed that a new DBJ board should be in place by the end of November.
Of course the current hot topical issue - the Trafigura Affair - was also raised, with the minister disclosing that he had written to the Bank of Jamaica Governor on the matter of client confidentiality and was assured that steps were being put in place to prevent any recurrence of a breach in this area.
http://www.jamaicaobserver.com/magazines...HE_ECONOMY_.asp