Thu | Apr 25, 2019

Gov't to tap equity markets to finance infrastructure projects

Published:Sunday | January 20, 2019 | 12:00 AMSteven Jackson
Aerial view of sections of the North-South Highway.

The Jamaican Government is proposing to use the stock market to raise funds for infrastructure projects in a move to avoid increasing the national debt, according to finance and the public service minister, Dr Nigel Clarke.

The country requires investments in the "hundreds of billions of dollars" over the next couple of years to maintain

its infrastructure, said Clarke in a wide-ranging address to investors at a forum organised by Mayberry Investments at the Knutsford Court Hotel, New Kingston, on Wednesday.

"That money cannot come all from the Government, but from the private sector," he said. "The time will soon come that the finances for infrastructure projects will come from you," Clarke told the audience comprising mostly private-sector interests.

The Government is planning to divest a series of assets, including Wigton Windfarm in Manchester this year, as well as some held by the Urban Development Corporation and the Port Authority of Jamaica. Those assets are operational companies held by the Government.

Referring to the Government's intention to finance new projects via equity, Clarke said, "The idea is that as the government becomes more fiscally responsible a lot of these projects will be financed by the investing community. We are bringing forward these projects and you would be left with long-term gain."

He added that the island remained the best place in the world to invest in the last five years when using the equity market as a measure.

Clarke also noted that the $68 billion capital expenditure on projects for this fiscal year has more than doubled the $32 billion spent some three years ago.

"It is the highest amount spent in last decade and even over a longer period of time," he said, adding that "capital expenditure improves lives and allows for the generation of economic activity."

 

DEBT DECREASE

 

The finance minister explained that the added capital arose from the reduction in the island's total debt levels from 147 per cent of total output or gross domestic product (GDP) in recent years, with projections of ending fiscal year 2018-19 at roughly 100 per cent of GDP. In accordance with Jamaica's agreement with the International Monetary Fund, he said that by 2025 the country would have a debt-to-GDP ratio of 60 per cent, which would immensley free up the amount of money available for spending on

projects.

Clarke was appointed finance minister in March 2018, having given up his job as chief operating officer of the privately held Musson Group to enter representational politics, running on a ticket for the incumbent Jamaica Labour Party administration and winning the North West St Andrew seat to become a member of Parliament. He was one of the 12 members of the Economic Growth Council, a private sector-led entity that advises the Government on a path to achieve its target of five per cent growth in four years.

 

EXPECTED GROWTH

 

Asked about that target, Clarke said, "We are on our way to higher growth, (but) before you reach to five you have to reach to two. We are double our historical average. ... We are clocking two per cent and 2.2 per cent growth per annum. Do not scoff at that. But there is no doubt that day will come."

Referring to Jamaica's 15 consecutive quarters of economic growth, Clarke said one would have to go back a "very long time" to equal such stability.

Additional positive indicators he highlighted were four years of low inflation and reduced unemployment from 16 per cent of the employable workforce in recent years to some 8.0 per cent. He also pointed out that exports are up 29.6 for January to October 2018 when compared with the corresponding period in 2017.

steven.jackson@gleanerjm.com