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Jamaica has debts totaling almost $18 billion, equivalent to an astounding 124% of GDP. The situation is so severe that annually Jamaica spends more than twice as much on foreign debt repayments as it does on health and education combined. Despite undergoing almost four decades of austerity in an attempt to tackle the issue, Jamaica does not qualify for any debt relief. It is deemed an ‘upper middle-income’ country, seemingly too rich to require such cancellation schemes.
Where Did The Debt Come From?
Jamaica attempted in the 1960s and 70s to instigate a new economic order not based upon neoliberal principles. However, the 1973 oil price shock rapidly pushed up the price of imports and created a recession in the country. To combat this, the Jamaican government needed to borrow to purchase vital goods from abroad, but the interest rates on these loans soon rocketed up. As a consequence, every single year since 1984, foreign debt repayments have remained above 20% of government revenue.
Role Of International Institutions
Whilst bilateral debt is relatively small for Jamaica, multilateral debt is rising rapidly. Since the 1980s, the various international financial institutions have been lending large amounts of structural adjustment bailout loans to the country. These loans have come with multiple conditionalities of financial liberalisation. Most recently, Jamaica has agreed a four year $932 million loan arrangement with the IMF (2013-2016). Despite this, and decades of previous IMF-coordinated austerity, growth has remained remarkably stagnant in Jamaica. There has been a vicious circle in which debt servicing and IMF conditionalities limit the ability of the government to fund the critical infrastructure and social programmes required to drive growth, and reduce debt distress.
Costs To The Jamaican People
Jamaica is currently at the mercy of the international financial institutions, and the impact on its population has been catastrophic. The first round of IMF bailouts in the 1980s instigated the eventual reduction in the number of registered nurses by 60%. Such cuts in social services across the board have meant that Jamaica is failing to meet several of the Millennium Development Goals. More recent IMF packages have also required a pay freeze in the public sector amounting to a 20% real-term cut in wages for a country struggling to reduce poverty rates. On top of everything else Jamaica also faces a serious organised crime problem. The government now faces the almost impossible prospect of having to achieve fiscal discipline to maintain debt payments whilst simultaneously attacking a crime problem that is hampering economic growth.
Potential For Change
Many analysts see Jamaica’s debt as unsustainable, and requiring action before it is too late. However, despite all the difficulties the debt has caused for the Jamaican population, it is ineligible for debt relief under the HIPC and MDRI schemes. One potential alternative now being discussed is the creation of a regional Caribbean-led debt relief initiative. Due to a similar assortment of factors, many Caribbean nations are in severe debt crisis and looking to act before it is too late. At the current stage, however, it remains to be seen as to who will take the lead in pushing for this important reform.