In 1989 when the then Prime Minister Edward Seaga led JLP administration demitted office Jamaica’s debt stock stood at J$31 billion. By 2007, after over 18 consecutive years of PNP rule, the debt exploded by over 2000 percent (yes over 2000 percent) to J$973 billion, or roughly J$1 Trillion.

When the Golding then Holness led JLP administration demitted office in December 2011 Jamaica’s stock of debt stood at J$1.6 Trillion.

What were the main components of this increase?

  • larger than programmed deficits due to the      fallout of revenue occasioned by the worst global economic crisis the      world has ever seen in a lifetime;
  • the devaluation of the exchange rate which      also was as a result of the global crisis, and which caused the nominal      Stock of debt to increase sharply as a result of the fact that half of the      debt is external (denominated in US Dollars), so when the dollar devalues,      there is a larger figure reported in Jamaican Dollars as a result. A big      portion of the reported increase in the stock of debt was not occasioned      by actually borrowing more, but was due to devaluation. (During the crisis      the dollar devalued from J$70:US$1 to J$86:US$1);
  • Assumption of debt for Air Jamaica, Sugar      Company of Jamaica, World Cup Cricket, Portmore Wastewater Treatment      Plant, Clarendon Alumina Productions faulty agreement, as well as Deferred      Financing Agreements entered into by previous PNP Governments, which had      to be paid, and;
  • Honouring labour union agreement with Teachers      based on a signed commitment by the previous Finance Minister Dr. Omar      Davies that the Government would honour the recommendations of a one man      Commission who recommended private sector parity for teachers pay. This      led to a J$30 billion increase for teachers alone, who got a 62 percent      increase in salaries.

These are the main reasons for a 60 percent increase in the debt, but bear in mind that had we not had a sharp reduction in interest rates from the Jamaica Debt Exchange, borrowing US$3.0 billion from the multilaterals at interest rates mostly at less than 2.0 percent per annum, the increase in debt would have been much worse.

Most importantly, despite the global economic crisis, and despite delays in reviews by the IMF, the previous JLP administration left an economy that was stable with the Net International Reserves (NIR) at US$2.0 billion, exchange rate stable at J$86: US$1 for 2 years, prices stable, interest rates at an all time low with Central Bank rates at 6.25 percent and mortgages cut in half from 18 to 9.5 percent with the economy growing at 1.3 percent in 2011.

Ever since the Prime Minister Portia Simpson-Miller administration took office the NIR has collapsed to US$1.1 billion, the dollar has devalued by 7.5 percent (with no world crisis), prices have gone up on everything due to devaluation, interest rates are trending up and the economy is back in recession.



1 Comment

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  1. We need to put things in perspective in real money terms (and not Jamaican ‘funny money’) Was the exchange rate in 1989 J$6.50 or J$5.50 to US$1?

    If that were the case then the debt in US$ terms at the start of the 3rd Manley administration was around US$5 billion (give or take)….then by 2007 the exchange rate was around $J70.00 to US$1. So therefore the debt at the end of the last PNP stint in office was only US$14 Billion. Really, only an increase of around 200%.

    Can we look at things objectively here? Mind you the exchange rate has been a huge factor. But when we look at the world currency standard, though bad, is not as extreme as 2000%.

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