POLL: Who do you give the most credit for Jamaica's improving economy?
(From left) Former Prime Minister Bruce Golding; Former Prime Minister Portia Simpson Miller; the IMF logo; Prime Minister Andrew Holness and Opposition Leader Dr Peter Phillips, the former finance minister.
Jamaica's economic turnaround over the past six years is being hailed as nothing short of remarkable by economists across the globe.
One of the world's most indebted countries, Jamaica has cut its public debt by the equivalent of half its GDP over the period and now boasts an economy characterised by low and stable inflation, falling interests rates, record low unemployment and Net International Reserves.
What's more is that the island has recorded some 16 consecutive quarters of growth; there is robust construction, with a number of high rises going up across the city; and business and consumer confidence are at record high numbers.
As to who should get credit for the improving economy is dependent on who you ask. The two major political parties claim credit, with the Opposition People’s National Party (PNP) constantly reminding the governing Jamaica Labour Party (JLP) that the now Opposition Leader, Dr Peter Phillips 'is the man who is responsible for laying the foundation'. The JLP has argued that the economic transformation started under former Prime Minister Bruce Golding, with the first Jamaica Debt Exchange (JDX).
Below, Loop News lists the individuals, groups, associations and institutions that, according to consensus, all played a part in the economic transformation. You tell us, in the poll, who you think deserves the most credit.
In January 2010, the administration of then Prime Minister Bruce Golding convinced financial institutions to buy into what was billed a Jamaica Debt Exchange (JDX), which involved the swapping of the bulk of public sector domestic debt instruments in exchange for securities, carrying lower interest rates and longer tenures.
The initiave saved the Government some $40 billion in interest payments.
Golding and then Finance Minister Audley Shaw had argued that the medium term initiative was pivotal to Jamaica securing up to US$2.4 billion in low cost financing from the International Monetary Fund (IMF) and other multilateral institutions, including the World Bank and the Inter-American Development Bank.
PETER PHILLIPS (SIMPSON MILLER ADMINISTRATION)
Dr Peter Phillips served as Finance Minister in the Portia Simpson Miller administration which was in office between January 2012 and February 2016. He is credited with rescuing the IMF programme which was abandoned by the previous JLP administration.
In February 2013, Phillips announced what was dubbed a National Debt Exchange (NDX) - widely regarded as JDX Part 2 - and received 100 per cent support from the private sector in short order. The NDX, which was expected to save $17 billion annually, was seen as the first hurdle to be cleared in Jamaica’s bid to secure a new agreement with the IMF which would pave the way for where the economy has reached today.
Phillips has often told the story of going to Washington DC for talks with the IMF and being told to “go get your house in order”. He eventually secured a nearly $1 billion loan agreement with the multilateral.
During the life of that IMF agreement, stringent fiscal measures were placed upon the backs of Jamaicans and there were some huge tax packages. During this time, Jamaica was forced to endure one of the highest primary surplus targets in the world – 7.5 per cent. This was reduced overtime to 6.5 per cent. Phillips also led the overhaul of the country’s tax system which has led to a massive increase in collections since.
The PNP passed every IMF test during this period but was often chided by the JLP for “failing the people’s test”. The fallout from the tough austerity measures that were maintained by the PNP government during four years in office, in part led to its defeat in the 2016 General Elections. However, soon after the elections, the IMF began easing restrictions and among other things, more money was made available to support programmes that benefitted the most vulnerable in the society.
THE PRIVATE SECTOR
The country’s private sector which is now reaping the benefits of an improving economy, sacrificed much under two debt exchange programmes across two administrations.
The 2013 debt exchange that was orchestrated by Peter Phillips, had the singular aim of lowering the Government's annual finance costs by $17 billion.
It shaved an average of two percentage points off interest rates on $860 billion of the country's domestic debt.
Pensioners, many of whom had money invested in government paper lost heavily.
The island’s public sector workers sacrificed a lot across two administrations between 2010 and 2015.
With wages being second only to debt servicing in government expenditure, the IMF had insisted that wages be frozen to give the government more time to get its house in order.`
By 2016, public sector workers had endured five years of wage freezes and were in a no nonsense mood when wage negotiations began with the new administration. Following a protracted delay, 80 per cent of public sector workers had settled with the administration by September 2018.
INTERNATIONAL MONETARY FUND
The International Monetary Fund (IMF) has been credited in some quarters for getting Jamaica on the path to economic recovery and growth.
The multilateral institution has monitored various programmes over two administrations and has insisted that Jamaica live up to its obligations unlike several under previous agreements that failed and ultimately kept Jamaica mired in debt.
Having told Peter Phillips to get his house in order, and having committed to a nearly US$1 billion loan, the IMF insisted that, among other things, Jamaica maintain the world’s most stringent surplus target of 7.5 per cent, now whittled down to 6.5 percent. Burdensome tax packages were imposed during a period of serious belt tightening and public sector workers were made to do without a salary increase for several years.
\With quarterly tests to pass, Jamaica had no choice this time around but to abide by the dictates of the IMF that kept close tabs on the government, in particular every move made by the Minister of Finance.
Economists and financial analysts say the Prime Minister Andrew Holness-led administration inherited a gift of an economic reform programme.
While this may be true, the goverment is being showered with praise for maintaining the fiscal discipline. The self-styled builder, Holness is at the head of the government at a time when the administration has far more wriggle room to spend. That spending is being seen in the level of road work, record housing starts and other construction taking place right across the country.
A record number of police and fire stations are being repaired or being built. Billions have been allocated to upgrade public health facilities and the government has announced its intention to build a number of schools. A new parliament building is also in the works and the government has said this is just the beginning.
The Holness administration negotiated a US$1.6-billion Precautionary Stand-By Arrangement with the IMF which replaced the Standby Arrangement that Phillips had negotiated with the multilateral thus ensuring continuity. That programme is slated to conclude in September 2019, at which time Jamaica's programme relationship with the Fund could end.
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