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New Paper Finds Pro-Cyclical IMF Agreement and Debt Burden are Blocking Jamaica’s Economic Progress
IMF Agreement Could Worsen Debt Burden, Harm Health and Education
WASHINGTON - May 4 - A new paper from the Center for Economic and Policy Research finds that Jamaica’s economic and social progress has suffered considerably from the burden of an unsustainable debt; and that even after the debt restructuring of 2010, this burden remains unsustainable and very damaging. Pro-cyclical macroeconomic policies, implemented under the auspices of the IMF, have also damaged Jamaica’s recent and current economic prospects.
“Jamaica is a clear case where the IMF and other international actors have put the economy in a strait-jacket,” said Mark Weisbrot, Co-Director of the Center for Economic and Policy Research. “Jamaica needs debt cancellation and economic stimulus to get out of its long slump, and it has not gotten either of these.”
The paper, “Jamaica: Macroeconomic Policy, Debt and the IMF,” by Jake Johnston and Juan Antonio Montecino, notes that the IMF program focuses on containing the wage bill, even though this can have negative consequences for a developing country that needs to increase spending on health and education. Curbs on the wage bill have put pressure on Jamaica’s struggling healthcare sector, creating uncertainty surrounding the treatment and payment of healthcare workers.
Despite the pro-cyclical measures that the IMF has been recommending, last week the Jamaican government announced it would seek a two-year extension of the current IMF agreement.
The paper notes that Jamaica is one of the most highly indebted countries in the world, with a total public debt of 129.3 percent of GDP at the end of fiscal year 2009/10, and interest payments on the debt over the last five years averaging 13 percent of GDP. This debt burden has crowded out most other public investment, especially in education and infrastructure, which have stagnated over the last 18 years. Jamaica’s debt has also held back progress towards the Millennium Development Goals, with declines in detection and treatment of tuberculosis, and in primary school enrollment rates.
The recent Jamaica Debt Exchange (JDX), the paper finds, has done little to solve Jamaica’s debt burden. Although the JDX was able to lower average interest rates on domestic debt, there was no reduction of principal and maturities remained virtually unchanged.