JAMAICA: RESPECTED THINK TANK DISCUSSES

UNCLAS KINGSTON 000561 SIPDIS STATE FOR WHA/CAR (JTILGHMAN) (VDEPIRRO) WHA/EPSC (MROONEY) SANTO DOMINGO FOR FCS AND FAS TREASURY FOR ERIN NEPHEW E.O. 12958: N/A TAGS: ENRG EAIR EINV ECON PREL TRSY XL JM SUBJECT: JAMAICA: RESPECTED THINK TANK DISCUSSES NATIONAL DEBT REF: KINGSTON 341 KINGSTON 277 Summary: -------------- ¶1. (U) The Caribbean Policy Research Institute (CaPRI) held a public meeting on June 12 to discuss the state of Jamaica's exorbitant public debt as a follow up to their report entitled "Jamaica's Debt: Causes and Constraints." CaPRI hoped the meeting would bring about solutions on how Jamaicans themselves and the government can take responsibility for reducing the country's enormous debt burden. End Summary. -------------- Nature and History of Debt -------------- ¶2. (U) Kim-Marie Spence, Executive Director of CaPRI, tracked the rise of Jamaica's debt from 1995, which has made it the fourth most indebted country in the world, measured either by debt to GDP ratio or debt per capita. Jamaica's debt-to-GDP ratio doubled between 1996 and 2003, rising from 76 percent in 1996 to 147 percent in ¶2003. Off-budget liabilities were a root cause of rapid growth in the debt between 1997 and 2003. Interest payments are a key factor contributing to the growth in the national debt. -------------- Prescriptions for the Debt Burden -------------- ¶3. (U) Economic growth and increased revenue are the main solutions for significant debt reduction and fiscal improvement. In an effort to address the tremendous debt burden, the CaPRI report recommends: (a) identifying, quantifying, and monitoring contingent liabilities; (b) minimizing or hedging against contingent risks; (c) implementing tax reform for quick revenue gains; (d) focusing on economic growth rather than amortization. Note: Audley Shaw, Minster of Finance and Public Service, has embarked on extensive tax reform in an effort to raise tax revenue, bring those currently out of the system into compliance, and ease the process of paying taxes (reftels) End Note. Spence emphasized that trying to lay blame for the debt would not make it disappear; instead she encourages Jamaicans to take ownership of the problem and find a solution. Spence added, "no one is absolved from this predicament we're all in it and we all should take some responsibility." ¶4. (U) Clarifying the root causes of Jamaica's debt, Minh Pham of the United Nations Development Program, said a "moral hazard was evident among the government and financial institutions, where risky lending and borrowing led to taxpayers and other parties having to take on the burden of losses which contributed to the national debt." The CaPRI report states that new avenues of borrowing in both the domestic and international markets are beginning to restructure the debt and secure funds at more favorable interest rates. ¶5. (U) Other speakers included Rhian Holder and Charles Abogre of Christian Aid, Carl Narcisse of the United Nations Development Program, Lawman Lynch of the Kingston Action Forum, and Latoya Richards of CaPRI.