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Jamaica has spent over half its time since independence in 1957 in some kind of IMF programme — a kind of awkward economic semi-colonialism that leaves both parties sour and resentful, and leads to award-winning films.
But as Alphaville has written before, the past decade has seen what is arguably one of the most remarkable and radical but under-appreciated turnaround stories in economic history.
The IMF has just finished another (virtual) mission to Jamaica to check in on progress — as part of reviewing a precautionary credit line and completing the regular Article IV reviews of all members — and once again its assessment is glowing.
Over the last years, Jamaica has successfully reduced public debt, anchored inflation, and strengthened its external position. It has built a strong track record of investing in institutions and prioritizing macroeconomic stability. This allowed Jamaica’s response to recent global shocks to be prudent, agile, and supportive of growth.
The economy continued to recover in 2023. After two years of rapid post-pandemic recovery, GDP growth is projected at 1.7 percent in FY2023/24, with tourism well above pre-pandemic levels and unemployment falling to a record-low of 4.5 percent by mid-2023. Inflation is converging to the Bank of Jamaica’s target band, though it was recently impacted by an increase in transport prices, whose effects are expected to dissipate towards the end of the year. Projected strong tourism inflows are expected to result in a current account surplus for FY2023/24 supporting a sound international reserves position. The financial system is well capitalized and liquid, and the public debt continues to fall.
This was a country that came very very close to complete financial and economic collapse (and presumably subsequent social and political disaster) in 2012. Back then, it needed a bailout but the IMF, World Bank and Inter-American Development Bank were fed up of spending time and resources on a perennial hot mess.
Even after they grudgingly signed on to Jamaica’s 16th programme (thanks to US political duress) a frequent opening joke among staffers when they subsequently met to discuss it was “Has Jamaica failed yet?”
Check out this chart of Jamaica’s gross government debt to GDP. After peaking at 144 per cent in 2012, the IMF estimates that it has now halved to about 72 per cent, and will dip to roughly 68 per cent by the end of the year.
That’s within touching distance of Germany’s debt-to-GDP level!
As the IMF said in its latest update:
The Jamaican authorities continue to implement sound macroeconomic policies, aided by sound policy frameworks. Supported by strong revenues and strict control of non-wage spending, a prudent fiscal stance continues to support a reduction in public debt, which is expected to reach 72 percent of GDP in FY2023/24 — the lowest in 25 years — well below pre-pandemic levels. The Bank of Jamaica has maintained an appropriately tight policy stance, and its data dependent monetary policy is countering the inflationary impulse from a strong economic recovery, tight labor markets, and global commodity prices. This policy mix is placing Jamaica in a good position to respond to shocks, counteract inflationary pressures, and secure debt sustainability.
Underscoring its financial rehabilitation, in November Jamaica sold the first Jamaican dollar-denominated international bond in history, helping both term out its payments and lessen its exposure to the dollar.
And yes, this has come at a cost to growth. But the economy HAS kept growing throughout, and unemployment is now at a record low of just 4.5 per cent (its jobless and inflation rates are now also similar to Germany’s). And the alternative to the IMF/WB/IADB programme in 2012 was not economic nirvana . . .
Tl;dr: Perhaps Jamaica should be sending a mission of its economic technocrats to Washington to help the US sort itself out?
Further reading
— Inside the IMF’s outrageous, improbably successful Jamaican programme (Pt. 1)
— Inside the IMF’s outrageous, improbably successful Jamaican programme (Pt. 2)
