THERE’S merit in the Jamaica Debt Exchange (JDX) programme being launched tomorrow by the Government of Jamaica.

The programme, as we understand it, will save the country $40 billion in interest expenditure on domestic debt over the next financial year, and the fact that it will not include external bonds means that it could have limited impact on Jamaica’s international credit rating.

The JDX, we are told, is designed to bring into a sustainable range, the amount of government resources devoted to servicing local debt, and reduce the debt in a manner that, the Administration is convinced, will be fair to all holders of government paper.

According to the Government, approval of its application to the International Monetary Fund (IMF) for a US$1.3-billion standby arrangement is hinged on the success of the JDX. As such, the administration is banking on full subscription to the programme by financial houses.

It is no secret that one of the contributory factors to our economy’s inability to grow is the heavy domestic debt which, at more than J$730 billion, represents a sizeable portion of our overall debt of $1.3 trillion. Interest rates as high as 27 per cent on government paper have made some people and institutions wealthy. However, the country generally has been hurt by its effects, and the policy of borrowing perfected by the previous Government and continued by the present Administration has only worsened our problem.

Now, the Government — rather than acknowledging that the economy is in shambles — seems to have found the cojones to implement the harsh measures necessary to pull us out of the deep economic hole into which we have been pushed by bad policies.

The Government’s entreaty to the financial sector for support of the JDX therefore, is an appeal to our sense of patriotism, as the holders of Government paper will be asked to accept reduced interest on their investment, even as the Administration has pledged to “repay every dollar of the principal borrowed”.

“Each holder of J$100 of old bonds will receive J$100 in new bonds,” the Government told us in a news release yesterday.

We suspect that some of the smaller financial houses will take a huge hit if they sign on to the JDX. However, we are encouraged by the Government’s plan to use US$400 million from the IMF and multilateral funding to “create a Financial Sector Support Fund to provide a source of liquidity to eligible financial institutions who may be affected by the issuing of new bonds in the exchange”.

That, we submit, makes perfect sense, for the Government has an obligation to level the playing field.

The Administration, we notice, has taken the commendable route of speaking with representatives of various sectors before outlining to the nation the measures that must be implemented to save the country from total disaster. It is obvious that the executive is coming around to accept that it pays to build consensus through consultation.

We have no doubt that what needs to be done will bring with it considerable pain. However, we believe that if the measures are properly implemented and the Government displays fiscal discipline, the end result will be worth the pain.