ARTHUR WILLIAMS, High Commissioner of Jamaica, said on Wednesday that the turnaround of the Jamaican economy was no easy feat.
Speaking at the Rotary Club of Port of Spain West’s luncheon at the Cascadia Hotel, he said: “Jamaica’s economic turnaround was not a magical overnight occurrence but the result of a commitment to reform from all walks of society – political parties, public sector, private sector and with strong support from our international partners. Credit must also be given to the people of Jamaica for their tremendous sacrifices over the years.”
He added that Jamaica has converted crisis into opportunity, and continued commitment to fiscal responsibility should hold it in good stead for sustained higher economic growth and development.
Williams had just given a brief sketch of the highlights of the Jamaican economy since independence under the various governments of Jamaica’s two political parties so his audience would understand what Jamaica went through to get to where it is today.
From April 1962-February 1972, Jamaica’s economy was a model for the region and beyond, and was regarded as the economic pearl of the Caribbean.
The growth figures from the Planning Institute of Jamaica (PIOJ) showed that the economy grew every year for those ten years, prompting then prime minister of Singapore Lew Kuan Yew, who visited Jamaica to determine for himself what Jamaica was doing right, to aim for these levels of growth and thereby to be regarded as a model for developing countries.
However, from February 1972-October 1980, Williams said, it was generally admitted that not enough attention was devoted to many aspects of the country’s social development. Instead, he said the government appeared more concerned with redistributing rather than creating income.
“The social policies and programmes that they introduced, though well-intentioned, were not sustainable without a thriving economy. Many citizens, particularly the business and productive classes, were threatened by the divisive rhetoric of socialism, and many fled the country. This, along with the oil crisis of the 1970s and the downturn in bauxite sales, caused a dramatic decline in Jamaica’s balance of payments and led to a substantial decline in economic growth.”
By then, the task of the government from October 1980-February 1989 was to turn around Jamaica from economic catastrophe . It did not happen. Worse was the economy under the next government, which served from February 1989-September 2007. This period saw the collapse of the financial sector. There was the disbanding of the foreign exchange auction system which had kept the currency stable for the previous five years, resulting in sharp depreciation of the Jamaican dollar. Also, inflation surged and commercial bank lending rates zoomed. But, Williams said, “The period 2007 to today is a remarkable period in Jamaica’s history and has seen three governments during this period. This period marks the greatest period of reform of the Jamaican economy and the greatest continuity between governments formed by different political parties.”
Between September 2008, when Lehman Brothers collapsed, and February 2009, the currency depreciated by nearly 20 per cent and the government responded by significantly tightening monetary policy and announcing a series of stimulus measures.
In August 2009 Jamaica sought an agreement with the International Monetary Fund (IMF). It was approved by the IMF executive board in February 2010. However there was a “prior condition” which had to be undertaken. This was the Jamaica debt exchange (JDX), a pre-emptive debt-restructuring scheme, intended to make public finances more sustainable and unlock funding from the IMF and the other multilateral institutions, the IDB and the World Bank. The JDX achieved the participation of all domestic debt-holders, allowing the restructuring of the entire domestic debt stock.
Williams said the government earnestly embarked on the reforms agreed with the IMF. However, the agreement stalled and the IMF did not disburse any funds after January 2011.
This was the result of a court order to the government to pay a promised salary increase to public-sector workers, thus ending the relationship under the stand-by agreement with the IMF, as the increase violated one of its most important conditions.
The new government spent most of 2012, its first year in office, negotiating a new agreement with the IMF. In 2013 the IMF announced a four-year extended fund facility arrangement.
The new government, which took office in February 2016, successfully completed the extended fund facility of the previous agreement. In October 2016 the government reached a new agreement
with the IMF for a 36-month stand-by agreement, which ends this month.
Williams summed up by saying during a three governments in the last 12 years, fiscal and external sustainability had been restored.
“Jamaica has achieved a level of unprecedented fiscal discipline – across the governments from opposing parties – delivering a primary surplus in excess of seven per cent of GDP for six consecutive years.
“Public debt is down from a high of 145.05 per cent of GDP in 2012, going below 100 per cent for the first time since the 2000/2001 financial year to 96.1 per cent at present.”
He also said tax reforms supported by technical assistance from the IMF and the IDB, which helped with administration and the switch from direct to indirect taxes, generated significant savings, thereby allowing for some net tax cuts in the 2019 budget – the first in living memory.
He added: “Unemployment is at an all-time low, at 7.8 per cent in 2019, the lowest ever in Jamaica’s history, and business and consumer confidence are at all-time highs.
“The economy has grown for 16 consecutive quarters and the pace is accelerating.”
He said annual inflation is low and stable at 4.2 per cent and the consumer price index is trending downwards. The deposit rate is at 3.2 per cent, which is a record low. Foreign exchange reserves are the highest in Jamaica’s history, now standing at US$3.098 billion.
Williams also boasted about Jamaica’s record-breaking tourist arrivals for the last two years, exceeding 4.3 million visitors, with an 8.6 per cent increase in earnings.