As everyone knew, and as Finance Minister Audley Shaw confirmed in the expenditure estimates he presented to Parliament this week, the Government has little room within which to manoeuvre with regard to its spending.

Mr Shaw's proposed expenditure for the fiscal year is $547.74 billion, which, nominally, is a rise of 7.8 per cent on the revised Budget for the fiscal year that ended on March 31. But that increase does not take in inflation, which we expected to have run at around 12.5 per cent.

Which brings us to the real crux of the problem Jamaica faces: debt of around $1.165 trillion or nearly $450,000 per individual. This year, it will cost $309 billion to service that debt or, 56 per cent of all the money Mr Shaw intends to spend will go to lenders. And that comes out before any other expenditure.

Of the $239 billion or so that remains of the Budget, nearly half will be used for the payment of wages and salaries, leaving little for capital spending, such as upgrading infrastructure, or to provide adequately the services the Government undertakes to deliver. Perversely, too, high debt in a poorly performing economy perpetuates the debt trap with the consistent rollovers: borrowing to pay the debt that comes due. That, however, serves to keep interest rates high, crowd out the private sector, undermine economic activity and job creation, thus maintain an unvirtuous cycle of poor economic performance.

The Golding administration, like its predecessor in earlier periods of crisis, has sought to deal with the problem by gaining concessions on wages from public-sector unions. So there is a freeze on public-sector wages this fiscal year.

That, however, fails to deal with the fundamental problem of a bloated, overstaffed public sector, which, as soon as the immediate crisis has passed, tries to catch up on the wages which it has "lost". As we have stressed before, it is time to move beyond the palliatives and take the really tough decision which, in this case, is likely to mean the loss of up to 20,000 public-sector jobs.

It also means implementing growth policies, such as aggressive tax reform and dismantling a bureaucracy that too often stifles entrepreneurial creativity. Economic expansion will diminish the relative impact of the national debt.

The current global environment, however, suggests that robust growth is not feasible in the short term. And in any event, the leverage required for expansion may be impeded by the debt burden.

Kingston Club

In this context, as we noted twice in these columns last year, Jamaica may have to begin to think of new and creative ways to deal with the country's debt that now stands at nearly 130 per cent of GDP. Our suggestion for negotiated relief of the domestic portion of the debt was endorsed by Jamaican economist Dr Paul Chen Young.

Minh H Pham, the United Nations Development Programme representative in Jamaica, this weekend joined the debate, proposing what he called a "Kingston Club" to provide not a write-off, but the varying of debt terms to provide the economy with "breathing space".

There will be many who highlight the impracticalities of the idea, but we feel that it is an issue worthy of serious dialogue.

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