Morris Cargill

THE INCREASED taxation in the Budget speech has set off, as you all know, a wave of rioting, road-blocking and looting. The whole thing has, I think, been spontaneous and not political.

The country is fast becoming ungovernable and if the security forces try to stop the rioting they will be accused of police brutality. In circumstances like these one would expect the Prime Minister to have made an immediate statement, not one a day late. Our trouble is that our Government is unpopular and we haven't got an Opposition worth a damn. What the country now needs is strong and intelligent leadership. I wish I knew where that is to come from.

The budget didn't really tell us anything much that we didn't already know. It revealed that in 1998 we had negative growth. Well, everybody who could read or write, add or subtract knew that already. Everybody, that is, except those two stalwarts of finance, the Minister of Finance and the Governor of the Bank of Jamaica. Both of whom had been busily hallucinating about growth. I think I better tell them, very gently of course, that 1999 will be another year of negative growth unless something very dramatic happens, such as huge sales by FINSAC or a sudden enthusiasm by taxpayers to pay taxes.

There was nothing in the budget to stimulate growth. Interest rates remain high and the increased cost of transport will work against growth rather than in favour of it.

The Minister of Finance was still priding himself on his control of inflation. The increased cost of transport could normally be expected to be inflationary, but I doubt they will be for the very good reason that inflation is being controlled because our whole economy is deflating. Inflation comes about when too much money is chasing to few goods. In our present case we seem to have lots of goods but little money to buy them. Our merchants are breaking their necks trying to sell us what they have. They are offering everything from motorcars to extended periods of interest-free credit to stimulate sales. Little do the customers know that the cost of these goodies is added to prices of the things they buy.

The budget was mainly about debts. Our total public debt now amounts to just under $264 billion. What is worse, is that our domestic debt is now nearly $140 billion and accounts for about 53 per cent of our total debts. This is unfortunate for a number of reasons.

Poorer nations

There is a solid movement in Europe at the moment towards forgiving the debts of poorer nations. A lot of writers are trying to make a case for this by saying that advantage has been taken of the poorer nations by the wealthy ones. As far as Jamaica is concerned this is nonsense. Nobody forced us to borrow. We walked into our debts because of bad management and lack of prudence.

Nonetheless, I'd like to see our foreign debts forgiven and I think that there would be some advantage to the wealthier nations in terms of increased trade. On the other hand, if all or part of our foreign debt were forgiven it would have to be on condition that we didn't immediately go about running up new debts.

However, in our case, if our foreign debt was forgiven we'd only be rid of less than half our debts because we owe more than half of them to our citizens. The advantage of having a foreign debt is that there is a good chance of being forgiven, but our Government would not dare to repudiate internal debts unless, of course, they wanted to enjoy a revolution. So whatever happens in Europe we're stuck with 53 per cent of our total indebtedness and this is rapidly increasing.

According to the budget our local debt is costing $30 million to service. Within a very short time that figure will be greatly increased. It would be seen from this that the interest on government paper by which we incur our debt is bound to run at least 23 per cent. If this interest rate was significantly reduced dawg would nyam our supper. For our US dollar would begin to take flight and the Government would have to start borrowing from abroad, which they can't, at the moment, do. I have no doubt that the Government will be able to sting the good-natured Mr. Moses of Citibank for a couple of billion, but that would have to be repaid.

As I have said, it is quite clear that our internal debt is now pretty well running out of control. Only by radically reducing the cost of our government's administration could some relief be obtained. This would, in fact, mean fully adopting Orane's recommendations and I don't see a chance of this happening. Although we've been hit for $4 billion more in taxes there is still a large hole in the budget. The Government seems to feel that we can leave this alone for a while and it will mend itself. I think that the Government had better ask the Governor-General to arrange for another Prayer Breakfast in which we could petition the Almighty to rain us some manna from Heaven.

Morris Cargill is the Gleaner's senior columnist who has been writing more than 46 years