Prime Minister Bruce Golding last night handed a lifeline to the Jamaican economy in the wake of global recessionary shocks, announcing billions of dollars in cheap loans and tax cuts to re-energise small businesses and the floundering fortunes of the tourism industry.

Citizens will also benefit from the raft of plans revealed, including mortgage payment relief and an elevation of the income-tax threshold, which was announced earlier this year.

Golding, in a broadcast to the nation, sought to inject confidence into an economy teetering on the edge of uncertainty, as job losses, high food prices and the plunging value of the Jamaican dollar heightened fears. The prime minister did not, however, disclose the rescue plan's repercussions on the current or future budget.

Multilateral aid

The stimulus package included US$600 million (J$47.7 billion), sourced from multilateral agencies, which will be pumped into the market to meet the need for foreign exchange. Most of the funds are expected to be available in six weeks.

"We are going to weather the storm," Golding told Jamaicans last night.

"Thank God we took the decision to re-engage the multilaterals. If we hadn't done so, we would have had nowhere else to turn and we would have been faced with a total disaster," he said.

Tax cuts will be in order for the tourism sector. General consumption tax (GCT) will be reduced by half for a period of six months, starting January 1, 2009, down from 8.5 per cent.

The Development Bank of Jamaica (DBJ) will also provide J$500 million for capital players in the sector to stem cash-flow problems. Each applicant will have access to a maximum $50 million at 10 per cent interest for two years. This is in addition to $100 million already being provided by the Tourism Enhancement Fund, Golding said.

Productive sector loans

The Government will also provide US$300 million (J$23.86 billion) to the productive sector, sourced through the Inter-American Development Bank (IDB) in January. The loans will be made available through commercial banks and the Export-Import Bank.

All locally owned companies can also expect tax on dividends to go.

"[This] will help keep them going, to protect the jobs of their workers and to encourage them to invest even in these difficult times," Golding told the nation.

Transfer tax on property transac-tions will also be reduced further to five per cent, following acut from seven and a half per cent to six and a half per cent in April.

The manufacturing sector and small businesses will also receive a boost. On New Year's Day, user fees payable by manufacturers on capital goods and raw materials will be scrapped.

Honouring a proposal made by the manufacturers some years ago, the Government will also adjust its contract procurement policy to provide preference to Jamaican-owned companies that submit bids that are no more than 10 per cent above the foreign competitor.

More cost

"It may cost us a little more, but we have to support our local manufacturers and suppliers," insisted Golding.

Likewise, small businesses will also get marginal government contract preference in a bid to stimulate more activity in the Jamaican economy. All government agencies will be mandated to ensure that at least 15 per cent of total procurement is reserved for small business and micro-enterprise suppliers.

The sector will also benefit from some tax adjustments as only businesses with annual sales of more than $3 million will be subject to file GCT returns, starting January 1.

"This will benefit approximately 2,800 operators," Golding said.

He said that while layoffs will be unavoidable, Government will provide retraining for redundant workers through the HEART Trust/NTA, via a special programme.

NHT strategies

The National Housing Trust has also been mandated to institute strategies to assist people who have been laid off or who have had income streams disrupted. These measures will include suspension of mortgage payments, reduction in monthly payments and rescheduling or extension of monthly payments.

The income-tax threshold would be increased to $220,272, in keeping with previous plans to provide relief to low-income workers. The threshold was last increased in July when it was moved up by 3.5 per cent to $200,304.

"Now is not a time to curl up and panic," Golding said. "If we pull together, if we build a national coalition with one agenda to put Jamaica on the right path, we can face this crisis and the future that lies in front of it with courage."

-- Edited by Garrick at 06:39, 2008-12-15