WASHINGTON, CMC – Jamaica’s Finance Minister, Dr. Nigel Clarke, says his country has the “distinction” of being the only country in the Western Hemisphere with higher economic output in real terms than for the comparable quarter before the coronavirus (COVID-19) pandemic.
Clarke, who was participating in a round-table discussion on “Overcoming Debt, Generating Growth” as part of the Spring meetings of the International Monetary Fund/World Bank, said that except for Guyana that, recently discovered oil, Kingston has also been able to have its unemployment lower in 2022 than it was before the pandemic.
He told the panel discussion moderated by the World Bank President, David Malpass. He included Raghuram Rajan, Professor of Finance at the University of Chicago’s Booth School, Ahmed Shide, the Minister of Finance of Ethiopia, and Tina Vandersteel, the head of Emerging Country Debt, GMO, that Jamaica’s debt to gross domestic product (GDP) ratio is lower than before the pandemic.
Clarke told the panel discussion on Tuesday that for at least 50 years, Jamaica had been in a “debt trap” caused by the financial crisis of the 1990s and the government’s intervention that cost an estimated 40 percent of GDP.
“This cost was socialized, borne by the government, and the last 25-30 years of our debt experience is inextricably linked with this banking sector failure in the 1990s. For your audience, by comparison, the financial sector crisis here in the US in 2008-10 was about nine percent of GDP.
“So, for Jamaica, it was severe at 40 percent of GDP, and we didn’t pursue a market solution. The government just took it on. And we never worked that debt off, which eventually brought us into crisis,” he added.
The Finance Minister said fundamental changes since 2010 involving both the governments of the now-ruling Jamaica Labour Party (JLP) and the central opposition People’s National Party (PNP) had helped ease the situation.
He also referred to the passage of a series of laws dealing with revenue administration, fiscal incentive reforms, the public pension system, which since 2017 includes contributory arrangements, and the move from direct to indirect taxation.
“We instituted fiscal rules and strengthened those rules over time that governments over the last ten years have followed,” he said, highlighting the country’s economic recovery to pre-COVID levels.
“Jamaica got its debt down from 147 percent of GDP down to 94 percent of GDP over seven years, and then COVID comes. An economic GDP contraction of 10 percent, debt/GDP goes back up to 110 percent, and alarm bells go off because before we went to 147 percent, the train stopped before that was 115 percent. So, at 110 percent, are we going to go back?
“No. We escaped from our fiscal rules, but our policy approach was targeted and temporary, unlike what we saw in many parts of the world where it wasn’t targeted nor temporary,” he told the panel.
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