Long before there was a global recession, the fundamentals of the Jamaican economy were not in good condition. Over the 36 years between 1972 and 2007, Jamaica's growth has averaged only around two per cent per annum, while our Caribbean counterparts have done much better.

Over the period 2003-2007, Trinidad & Tobago's gross domestic product (GDP) grew at an average rate of 9.7 per cent; Barbados grew at 3.6 per cent; and for the same period, Jamaica grew at an average of 1.7 per cent. This disparity in economic growth can be attributed to high levels of public debt and continual missing of fiscal targets.

Since 1962, when we obtained our independence, the central government has produced a fiscal surplus only nine times. All of that deficit spending has attributed over the years to the amassing public debt. Every time the central government runs a deficit, it has to be financed either by way of borrowing or by printing money. We have chosen to borrow and, thus, we see those consequences: in 1990, the total public debt was $43.2 billion, in 1997 it was $221.3 billion, in 2007 it was $990.8 billion and now it is over a trillion dollars.

Apart from continually missing our fiscal targets, the rapid debt accumulation can be attributed to a number of things:

i) low rates of growth;

ii) the strain of contingent liabilities and loss-making public bodies such as Air Jamaica and the Sugar Company of Jamaica;

iii) and, of course, the financial meltdown of the 1990s which gave rise to FINSAC. By June 30, 2000, the FINSAC debt was estimated to be approximately 40 per cent of GDP.

All of this debt has pushed our budgeted interest costs, and therefore our total expenditure, to an extremely challenging level. This reduces the funds that we can spend on critical social services and leaves us vulnerable to adverse exogenous shocks. Also, if the Government has to borrow beyond the market's capacity in order to cover the deficit, interest rates will rise and the 'treadmill effect' will take place. This has been the case for the last number of years.

Let us now put this into the context of a world economy in crisis. All of the major economies around the world are experiencing tremendous challenges. British Prime Minister Gordon Brown said: "We are living through the first financial crisis of the new global age." World Bank president Robert Zoellick said that developing countries "find themselves at the mercy of a crisis not of their making". Ultimately, the experts feel that this recession will turn out to be longer and deeper than was originally anticipated.

THE BUDGET

In the meantime, many of the world's major economies have turned towards expansive stimulus packages to fight off the slowdown. With our financial constraints, Jamaica simply cannot afford such a luxury. We have no choice but to reduce the fiscal deficit and move towards a balanced budget.

As you know, the Estimates of Expenditure was tabled in the House of Representatives, the Budget Debate has begun. This process comes as a result of several Cabinet retreats and hard work from all of the ministries.

For the budget year 2009/10, fiscal expenditure has increased by approximately 14 per cent which, when the 12.4 per cent rate of inflation is considered, is a real increase of only 1.6 per cent. With the new estimates, about 57 cents out of every dollar will go towards debt servicing. Even though this assumes a projected decrease in interest rates, it is a ratio still much too high if Jamaica is going to have sustained macroeconomic growth and stability.

We are fully aware that a credible fiscal adjustment is a pre-requisite for restoring confidence and creating a virtuous cycle of stable exchange rates, lower inflation, lower interest rates and improved debt dynamics.

REFORM

Moving towards a balanced budget is just one of the many steps needed to put Jamaica's economy on a track towards growth and prosperity. We must also increase our productivity, control the national debt and strategically invest in high-growth areas. The urgency of this is even more pronounced when most of our foreign-exchange earners (tourism, remittances and bauxite/alumina) will be down.

We must improve our absorptive capacity for foreign direct investment, unlock the entrepreneurial spirit and increase available financing for small- and medium-size businesses. We must also shift towards performance-based incentives for investors and performance-based rewards for the public-sector workforce. The overall aim is to make Jamaica a more business-friendly environment.

These policies are embodied in the GOJ comprehensive six-point Fiscal and Debt Sustainability Reform programme:

i. Controlling public-sector balances and debt.

ii. Rationalising public bodies

iii. Improving central government financial management and budget processes.

iv. Increasing revenue collection.

v. Increasing growth and competitiveness.

vi. Managing the public-sector wage bill.

Indeed, these are difficult times, however, the markets will rebound and Jamaica will have to ensure that it is in a position to take advantage of a growing world economy. We missed great opportunities the last time. We cannot afford to miss them again. Therefore, now is the time to make the difficult decisions that will help us reshape the economy. If we plan to realise our 2030 vision, we must all be prepared to make the necessary sacrifices. This includes the Government, the Opposition, the private sector and everybody else. As United States President Barack Obama's Chief of Staff Rahm Emanuel has said: "You never want a serious crisis to go to waste."

SINCEREST GRATITUDE

As most readers would have already heard, I have announced my plans to leave the Government at the end of July. I would like to express my sincerest gratitude to the prime minister for giving me the opportunity to serve my country.

It has been challenging at times, but it has also been most rewarding. It was certainly my privilege to have been part of the prime minister's team and to be able to work closely with some of the brilliant minds serving in the public sector.

The experience has taught me much and I would like to quote the governor general from his Throne Speech at the opening of Parliament:

"The Government and the Opposition must set the example and be constantly engaged in a new dialogue, respectful of their differences, but deeply mindful that the Jamaica that unites us is infinitely greater than the political parties that divide us." God Bless.

Senator Don Wehby is minister without portfolio in the Ministry of Finance and the Public Service. Feedback may be sent to columns@gleanerjm.com.