Dawn Ritch, Contributor
IF WE thought Jamaica was poorly managed before, just wait. Here is the Most Honourable speaking in the House of Representatives on the subject of the war in Iraq:
"I call on all of us to be alert to the developments in the near term, to take steps necessary to preserve and conserve supplies of food and oil, and to support the collective efforts to address a situation over which we have so little control."
Well, the Jamaican dollar went from 49 to 55 to one US dollar in recent months, and the Net International Reserves plummeted from US$1.9 billion to US$1.2 billion, both before the first shot was fired in the Iraqi War. Indeed the Patterson Administration had already secretly given themselves and the bloated Jamaican civil service a huge pay increase which they don't deserve, and which this country can't afford, before there was even the smell of gunpowder in Iraq.
Now, Prime Minister Patterson advises us to conserve food and oil supplies, as though American bombs will be dropping directly here on us in Jamaica, instead of way over there in Iraq.
Some negative economic impact from the war should be expected in Jamaica. For the Prime Minister to suggest that the situation in Jamaica, however, is one "over which we have so little control" is nothing short of ludicrous. That's like saying I have no control over my life. Or that faced with fast-vanishing resources and bankruptcy, the Government should build a brand new Parliament building for hundreds of millions of dollars, and give tens of billions of dollars worth of salary increases to a civil service which doesn't deserve it, from a Government and beleaguered taxpayers who can't afford it. And all this while the houses of the poor burn down for want of a fire engine, or water supply.
It reminds me of a column I wrote in the 1970s when the dollar was plummeting, and there were import restrictions on everything from butter to rice. The then Michael Manley Government had launched a public education campaign called "Tun yu han' mek Fashion". In effect, it called for the patriotism of the Jamaican people and asked them to make do with nothing. One of the movers and shakers behind the campaign was a family member. Nevertheless in the middle of it, the family member took off for New York where she borrowed a mink coat to wear to some meeting in Moscow.
Then as now, only these who have the misfortune to be governed by democratic socialism, have to "tun dem han mek fashion", or conserve on food and oil. The politbureau never has to. Mr. Patterson's cupboard will therefore always be full, and his vehicle filled, even if the rest of us have to eat yam and ride bicycle. I also seriously doubt that any war in Iraq will have caused either, only the grim mismanagement of the Patterson administration itself.
There were international oil shocks in the 1970s under the PNP, and an international recession in the 1980s under the JLP. Bauxite and tourism were down in the 80s, but nobody told us to 'tun' our han' mek fashion', nor to conserve food and oil. The Edward Seaga-led JLP Government implemented preparations, brought the country through, and made the economy grow. Compare this with our current Prime Minister, Mr. Patterson, who managed to have continuous decline in the Jamaican economy in the 1990s when the world economy was booming, and who now sighs at the helm that he has "so little control", because of the war in Iraq.
It ought to be blindingly obvious therefore, that, always in need of them, the Most Honourable has found a ready-made excuse for our yet more precipitous economic and social decline in 2003. Will the Prime Minister and his Minister of Finance Dr. Omar Davies please tell us what plans they have if any, to deal with the potential fall-out from war in Iraq? All Dr. Davies said to the House of Representatives was that he had to postpone a trip to Europe to borrow money, because of the uncertainly arising from this war. If the Cabinet, public officials, civil servants and their $100 million a year consultants cut their foreign travel in half, that will make Jamaica richer by the score.
But even that will not be enough to halt the country's decline. What about the falling exchange rate, urban city renewal, the pay increase to the civil service, Air Jamaica, and flip-flopping interest-rates, none of which can be blamed on the war? Neither George W. Bush nor Saddam Hussein has anything to do with any of that.
Last month interest rates went up to 30 per cent for four days and then went down, and subsequent to that went from 16 per cent to 21 per cent in a single day. In one day alone therefore, there was a five per cent variation, and this before a single bomb fell on Iraq. The more likely cause is that the Ministry of Finance and the Bank of Jamaica are out of kilter, and trying to revalue the dollar without success and at huge financial cost.
Last week the BoJ echoed the view that speculators are driving up the cost of the U.S. dollar in Jamaica. This is not really the case. Sources tell me that some large Jamaican investment houses have been borrowing money overseas by margin-financing their Government of Jamaica issued U.S. dollar global tax-free bonds. The cash from the financing is in turn used to purchase more GoJ global bonds, that is in turn pledged to raise additional cash for investing once more in more bonds. These bonds have now fallen in value however, and the lenders have called in their chips by requiring the local companies to pay down these short-term loans. The local companies are scurrying around therefore, to raise cash to cover the margin calls and short positions overseas. This is the main cause for the pressure on the Jamaican dollar since January 2003.
The BoJ has also just increased its one-year repo interest rate, and investors and savers are rushing out of 30-day and 90-day money to take up the new offer. Money is now flowing out of the investment houses, and directly into the Bank of Jamaica. This may help reduce pressure on the Jamaican dollar temporarily, but it has other costs and serious consequences. Like business and banking failures all over again.
It seems to me therefore, that monetary and fiscal policies are at sixes and sevens. Hard decisions have to be taken about what makes sense and what does not, about what must be dropped from the budget and what must remain. And none of this had anything to do with the war, or international conditions of any sort. In brief the Government needs to tell the country how it intends to deal with both the budget and trade deficits. These are the issues that the Administration must address in order to restore confidence in the Jamaican dollar.
The Patterson Administration has to take the necessary and painful measures to cauterise these problems, regardless of what happens in Iraq.
