Jamaica is no Argentina. No matter the struggle, Jamaica has always paid its debt. Indeed, the law gives debt-servicing the first call on the national treasury. On Monday, for instance, the Government redeemed a US$250- million bond which fell due, drawing on the central bank's reserves to clear the obligation.

Such resolve stiffens the confidence of the island's creditors, suggesting, as it does, that even in the most difficult circumstances, Kingston's policymakers will struggle to avoid default. There have been some rewards for Jamaica's good behaviour.

As Audley Shaw, the finance minister, and his technocrats were working through the details of meeting this week's credit obligation while keeping the economy on an even keel and avoiding further pressure on the Jamaican dollar; in Buenos Aires, a new phase in a different approach to a debt crisis was emerging. And that is what Jamaica, like Argentina faces: a debt crisis.

Transaction taxes

In 2001, Argentina defaulted on US$95-billion debt, for which it subsequently gave creditors, or those who would accept it, new loans, which, initially, were backed by transaction taxes. Some international lenders challenged the action in court. Last week, domestic holders of some of these debts swapped an estimated $4.4 billion of these loans for new higher-priced bonds.

What is important to the Argentine treasury though, is that it postponed an estimated billion and half dollars in interest payment that would have fallen due on these instruments this year. It has similarly approached international holders of the guaranteed debt with the offer of a swap for bonds. Some might take up the offer on the premise that in the current global environment it is better to be assured of some interest payments than be saddled with non-performing assets.

Jamaica's immediate problem

Jamaica's immediate problem is not as deeply critical as Argentina's. Approximately US$700 million of inflows over the next several months from the multilateral financial agencies, plus US$100 million borrowed by the Government from Bank of Nova Scotia, will help to shore up the central bank's reserves. There also is the fact that a portion of the redemption was owed to Jamaica and that some will find its way into the national economy.

New signs of liquidity should ease market pressures and slow, if not halt, the slide of the Jamaican dollar. If the Government tables a credible budget in April and does not crowd out other borrowers, interest rates should ease.

But whatever scenario plays out, Jamaica will still face a big problem of debt, servicing of which, for the fiscal year, was estimated to cost over J$160 billion, or nearly 60 per cent of the national budget. Devaluation and rising interest rates pushed that cost higher. At around 140 per cent of GDP, debt is a real deterrent to decent economic growth in Jamaica. It siphons money away from real-economy investment - by the Government and the private sector.

Clearly, default is a bad and offensive word, a concept with which Jamaica can have no dealing. Yet Jamaica, some suggest, might wish to consider how it might 'restructure' its debt - particularly the half a trillion dollars that is owed internally.

This matter was briefly on the agenda earlier in the decade. In the current global economic crisis, it may be again worthy of discussion.

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