WASHINGTON, DC – Jamaica’s Finance Minister, Dr Nigel Clarke says his country has the “distinction” of being the only country in the Western Hemisphere that has been able to record higher economic output in real terms than for the similar quarter prior to the COVID-19 pandemic.
Jamaica’s Finance Minister Dr. Nigel Clarke, second from left at panel discussion on “Overcoming Debt, Generating Growth”.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 with the exception of Guyana that recently discovered oil, Kingston has also been able to have its unemployment lower in 2022 than it was prior to the pandemic.
He told the panel discussion that was moderated by the World Bank President, David Malpass and included Raghuram Rajan, Professor of Finance, 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 prior to 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 and it eventually brought us into crisis,” he added.
The Finance Minister said fundamental changes since 2010 and involving both the governments of the now ruling Jamaica Labour Party (JLP) and the main opposition People’s National Party (PNP) had helped ease the situation.
He made reference also 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 10 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 all the way down to 94 percent of GDP over a seven-year period and then COVID comes. An economic GDP contraction of 10 percent, debt/GDP goes back up to 110 percent, 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.
