KINGSTON, Jamaica (CNN) -- Jamaica's prime minister Tuesday cut in
half a gasoline tax that ignited deadly rioting, and promised to come up with
other ways to make up the $37 million budget shortfall the rollback would
A 31 percent hike in gasoline prices April 16 -- which increased the price
the pump from $1.55 to $2.01 per gallon -- prompted three days of rioting
that killed nine, damaged millions of dollars' worth of property and rocked
Prime Minister P.J. Patterson's government. More than 160 were arrested.
Last week's unrest brought the Jamaican economy to a standstill. Gun battles
erupted between police and protesters as flaming barricades shut down
traffic in Kingston and other towns. The disturbances led to the cancellation
of flights and cruises to the Caribbean island, which relies heavily on tourism.
Foreign embassies have since lifted travel warnings.
Patterson quelled the protests by appointing a committee to find other
to increase revenues. He said Tuesday he would accept the committee's key
recommendation: reducing the new gas tax by 50 percent.
"The events of last week served to remind us any solution we devise as
government cannot succeed without the understanding and the involvement
of the people," Patterson told Parliament. "Some lessons are hard for all of
Government says new plan won't hurt poor
He promised to present concrete plans later to make up the $37 million
shortfall, adding that the new plans would "not impact adversely on the
Those plans, Finance Minister Omar Davies said, include a 15 percent tax
on interest from stocks, bonds and other investments. The measure is
expected to earn $48.6 million.
To soften the blow to investors, the government will cut the tax on savings
account interest from 25 percent to 15 percent -- a loss of $22 million --
and reduce the maturity of certain savings bonds from seven years to five
Patterson said his government would work to reduce interest rates in hopes
of stimulating economic growth.
Police beefed up patrols before Patterson's speech, and officials of the
People's National Party met with community leaders to appeal for calm.
"Our leadership has been out in the communities doing what they are
supposed to do -- mobilizing, organizing and preventing further roadblocks,"
said party leader Paul Burke.
Earlier, Jamaicans had threatened more protests if the tax wasn't reduced
Kingston's streets were calm after Patterson's announcement, and residents
said they hoped it would stave off further unrest.
"The new measures don't sound bad, and they will keep (people) from
burning down the place," said Donna Stewart, a Kingston insurance
Policies tamed inflation but slowed growth
The new taxes and fees would have raised $110 million to help fund a
bailout of failed banks, insurance companies and pension plans. The
government blames the problems on its decision to respond to outside
pressures to ease state controls in the economy in the 1990s.
Since taking office in 1992, Patterson has followed the prescriptions of
international lending agencies, eliminating most price controls, privatizing
government enterprises and maintaining tight monetary and fiscal policies.
That agenda has helped slow inflation and stabilize the exchange rate.
However, the policies also resulted in a sharp slowdown in economic
growth. By 1996, the country was experiencing negative growth, while
inflation and joblessness remained above 15 percent.
Adding fuel to the fire, Jamaicans must cope with a high cost of living.
government admits that a single balanced meal for a typical family of five
costs $43 -- just about double the weekly minimum wage and equal to a few
The Associated Press and Reuters contributed to this report.