Cabinet pores over report on preliminary IMF talks

[Dr.Dudd]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: RichD</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tuff Gong</div><div class="ubbcode-body">
Are you sure you know what you are talking about here?
Isn't it generally agreed that most of the local GOJ debt is locally owned and that is what RichD means when he say externalize to sell the debt abroad?

In any case are you agreeing or disagreeing that is will be part of a solution. If so a solution to what?
</div></div>that is exactly what im referring to when i say externalize....reduce the local economic exposure to any possible default. With things as they are right now if the GOJ was to default on debt it would be catastrophic locally (to the point of almost unrecoverablity). </div></div>

<span style="font-size: 11pt">Sorry I was doing economic/financial speak.
I thought you would have realized that it is impossible to limit the availability of government paper unless the government was offering it to another sovereign entity.
The former administration tried to and was successfully raise the majority of it;s loan through foreign placements.fir the initial period when they started going to market for funding. It was always quickly taken up by the Guarantor, who promptly sold them to [b] Jamaican buyers. That went on for a while until the government decided that since the debts is being resold to Jamaican at a premium, it would be better ti just sell them locally. At least with original intention they expected to increase the funds in the economy, while avoiding the pressure on the local currency due to the need to buy foreign currency to take up the loans. Well it never work so they resigned to sell in local currency the majority of the debt, while only using foreign currency for foreign exchange requirements. That worked only after they stop using US clearing houses and when to Germany, But guess what? It was only after the current economic collapse, when the local lenders start complaining that they did not get their interest payments, did the government realize that even the EURO debts were then resold to locals. SO if the government should default or reduce the loans the vast majority are held b y locals irrespective of whether they are foreign denomination, or not. I thought you was aware of this. I mean you have been posting on this topic for so long and did not get informed as to the reality of the loan portfolio status?
Lt is impossible to get Jamaica's debt to be taken up and kept by foreign investors. That is why I have been saying that Jamaica should negotiate with China to refinance these loans with the a little bit of the excess reserves they have. At least it would be held by China and would not found it's way in the oisession of local investors.
So that is a zero. </span>

[Tuff Gong]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Dr.Dudd</div><div class="ubbcode-body">]The Economy cannot even begin t expand [b] until ther is stabilization of the currency. businesses have to know that the current will be what it is when they have to pay their suppliers for raw materials </div></div>

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Tuff Gong</div><div class="ubbcode-body">[That is not quite true, in any case the Jamaican currency has be relatively stable for nearly a decade and businesses in Jamaica has suffered and the economy has tanked...<span style="font-family: 'Arial Black'">next failed suggestion</span>! </div></div>

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: RichD</div><div class="ubbcode-body">how can you call a 20% devaluation just in the last year stability?

100% since december 2000 </div></div>

Removing the last year from the equation, which is understandable given the changes <span style="font-style: italic">(minus the World Financial collapse which is almost tangential to Jamaica's recurring problems)</span> and taking 8 years to mean ten <span style="font-style: italic">(I am using your 2000 to now timeline since you did not go back the full decade as I mentioned)</span>.
Given what we know is taking place in Jamaica, I would say the GOJ via the Bank of Jamaica has done a great job in holding the currency to where drops are pretty much expected to be no lower than a certain points and similarly revaluations are also not unexpected and certainly would not be out of the Ball Park numbers.

So while we can point to devaluations <span style="font-style: italic">(and the aggregate numbers look large) </span>I would go out on a limb to say the currency by and large was held pretty stable from the POV of a person doing business and relying on the Ja$ vs. other currency relationship.

[Wahalla]

Re: 'NO ALTERNATIVE THAN TO RESUME IMF BORROWING' - SHAW

Doc

I agree with a number of issues with you…. I also agree with a lot of what Mr Gong says…. Fence sitting is painful!!!!

However my economics awareness comes not from a lecture but from being a small untrained failed small farmer who had to take his crops to the market, as real as it gets… Am a great consultant though!!!!!!!.…not being a economics lectuer r at UWI..I don’t dismiss academia nor do I claim that I got my economic training on the street. I have none… Thus my understanding of economics does have too much emphasis on causal causes and may not appreciate the fact that there are other causes to the effect. However being an obsessive personality makes me relive the past adventures and place in context why I failed.. A post operation debrief of my failure if you will….I do listen obsessively to World Buinsess report on the BBC which discuss a hell of a lot of macro economics issues from various perspectives.. So for the past twenty years that is a hell of a lot of lectures in economics!!!! So as time goes the prism of analysis has shifted..


Ever been to Santa Cruz or Black River Market recently ???? To describe them as pig stys would disgrace a pig farmers.. (Last time I was there was a couple years back)….But here in lies an issue on tax compliance.. why would a higgler pay taxes on their income they gain nothing their tax will go to subsidies other things (like air Jamaica, failed banks ect) that don’t generate revenue.. while they work in a pig sty ? Why not pay the pitch price if they ketch yu… …Why would the informal promoters r the dance hall operators pay tax ???? Why would the guy who runs a jerk stand ? for no services…Why would tge small business shop owners ? Why pay NHT contributions if you know you will never get a house ????

Why would the man who generates income.. they are just like the expat who owns a home rents it out but fails to pay declare it… Not just the expat but there are hundreds generating incomes from real estate who formally don’t declare it…The way to go is property tax as you have pointed out.. horrendous taxes on properties unless the owner can prove it is their principal residents….Well Chavez did it so it must meet approval with the left !!!!!

I think less than 30 % tax is being collected…. All investors in Jamaica get unfair tax breaks relative to local business men.. The big hotel owners get tax breaks to invest. The weed men don’t get taxed. Trades men do business in cash, taxi drivers don’t declare…. Who gets taxed are those in the formal economy, and they face an unfair burden….cost of contact with government is horrendous….

We need to get more tax revenue flowing ….I don’t have a solution of tax collection but unless the income to the government is increased, then the government will continue to fund its operation via loans.. principallty from the local market this driving up interest rates. Best bond rate is 24% there may be higher rate…driving up the cost of money depriving locals from developing businesses and competing against forgien business who get their money from a cheaper source.. Now third world economics are talking about legal home ownership as a social developer, not government intervention , what is the mortgage rate at the moment ???

And as it borrows it continues to dig.. and it seems to hope that the inevitable inflation will denude the value of what it owes irrespective of the cost to the poor who have no reason to save. (There was a point in the 80-90 when the price of a second hand car increased !, I don’t need one of your lectures to tell me that there is something wrong given at the rime the number oif cars being imported !!!!)… Tell me do you think our thirty year stagflation has done more damage than our previous contact with the world bank or less ????

From pointless tirade it strikes me that the government is cutting the throat of the economy….By keeping the price of local money high we cannot develop our way out of mirsima.. No matter what. I have no faith in government to develop with the capacity small enterprises which is fundamentally lacking. Our government is incompetent at many things but its incompetence at tax collection is Italian….

You claim that it is a conspiracy against black Jamaicans….It may simply be that black Jamaicans dont have the collateral to get a loan from the small funds available from commercial banks as much as it was attitudal ???? I could not get loans to fund a coffee business in the 70’s.. (Yep the Agriculure Ministry who administered the grants told me that I was not black!!!!! And that the money was for black people only…. Well he should have said that I was underage at the time and should be in school…).. A few years later in the 80’s did go to the bank and got told I had no legal collateral, no bank account, no credit history…., a few chain of product/ gungu did not count! (was a good choice on their part in hind site… my skill set was lacking).. But it was and is still a good plan…I could not get a loan as I did not have the collateral…

I have had an obsessions on coffee all my life after I realised the mark up from the price of coffee in Jamaica after seeing an advertisement in a Sunday Mail some one sent to my mother.. I still shudder at the mark up on pimento every time I see it… I think the last time I worked it wout was 1000% mark up, for the price paid to those who sell…!


Bank lend claim they are hugely profitable, unusual but there are those at double digits the most common) and claim to lend 15% to private business… I wonder if it is 15% or they defined government qungos as buinsess… This lack of credible credit is a huge stumbling block….

A small step is a long term goal.. get the idea of tax as nessary evil at school.. Get back to Civics lessons.. The pointless JSC…

[evanovitch]

&quot;Harsh realities ahead ,&quot; sez PM

......&quot;

Harsh realities ahead

In the meantime, while declining to give details, the Prime Minister hinted at the harsh realities likely to face the country as part of its borrowing conditions.

Prime Minister Golding was blunt about the need to reduce expenditure and bring down interest rates.

&quot;Interest payments are the biggest items in the budget, bigger even than the public sector wage bill so that is where the conditionalities are going to come in, reducing expenditure. In reducing expenditure where does it impact? That is our job and that is a responsibility I accept to ensure that we protect as much as possible those vulnerable areas,

&quot;The social safety net, the IMF has agreed with us that at all costs that has to be protected. We cannot afford to move resources from the security forces, we cannot afford to cut resources from education, I am not going to allow any cut in the resources for health,&quot; he said.

Cutting the fat

He said the extras will simply have to be cut.   

&quot;The IMF told me that in this period that we are going through in which people are going to be asked to bear a burden in that potholes that you would like to fix, you can't fix; you are going to have to cut expenditure in areas that you would like to spend more,

&quot;The IMF is also of the view that the financial community that are partners in this effort, they must also be prepared to help the country through this crisis. You will notice that interest rates have begun to come down on Friday. We want that to be a trend. We are doing everything possible in the dialogue that we are having with the financial community to try and make sure that we can trend it down,&quot; he said.

However, Mr. Golding reiterated his administration's assertion that the IMF has tempered its previous hard-line stance with its borrowers.&quot;

[Dr.Dudd]

Re: &quot;Harsh realities ahead ,&quot; sez PM

All this while the same ones that were benefiting from the high interest rate the government pay were complaining that the public sector wage bill is too high. Creating a distraction, from the fact that they are the biggest derain on the government..

they want the working people to be starved out, but never want any reduction in the rates paid them on the loans to the government.

the problem is that ther is no where in this earth that they could get even a half of that rate ,but as usual their greed and selfishness overcome that little fact.