Jamaica, with an estimated population of 2, 709, 300 in 2011, has not succeeded in positive development, according to private sector dictated international standards, over the past four decades. Currently, the largest challenge is Jamaica’s massive international debt “which is currently estimated at 139.7% of the Gross Domestic Product” (Work Bank, 2013). The Jamaican debt to GDP (Gross Domestic Product) ratio is third highest in the world. The unemployment rate in Jamaica hovered at approximately 14.3% in 2012 with notably higher unemployment and crime rates among the youth. Jamaica’s murder rate is one of the highest in the world today.
The World Bank
As would be expected, the World Bank has had its hands in Jamaica since its independence in 1962. The World Bank currently boasts of seven ongoing projects in Jamaica: 1. Inner City Basic Services Project ($29.3 Million dollars), 2. Social Protection Project ($40 million dollars), 3. Jamaica Second HIV/AIDS Project (a meager $10 million), 4. Rural Economic Development Initiative ($15 million), 5. Early Childhoodhood Development Project ($15 million dollars), 6. Energy Security and Efficiency Project ($15 million dollars) and 7. Education Transformation Capacity Building ($16 million dollars).
The most recent activity of the World Bank in Jamaica is in the form of a Jamaica-World Bank Country Partnership Strategy (CPS), designated for the period of FY10 through FY13, with the goals of 1) supporting economic stability through fiscal and debt sustainability 2) promoting inclusive growth by supporting programs that strengthen human capital, prevent crime and violence and promote rural development, and 3) Promote sustained growth by improving competitiveness. The Country Partnership Strategy is a joint effort between the World Bank, the Caribbean Development Bank and the Inter-American Bank.
Looking at these three goals in-depth, we see that the first pillar of supporting economic stability is where the two main policy-based loans are issued. The second pillar of promoting inclusive growth and the third pillar to promote sustained growth are the areas where the private sector infiltrates the state, which will pay for these ‘contributions’ in development with conditional loan funding described in the first pillar of the World Bank agreement. In order to illustrate these methods in most basic format: the field of crime prevention would entail the purchasing of new police technologies to battle crime, agricultural development would entail purchasing agricultural technologies, and battling diseases would entail purchasing technologies and medicines.
One of the major concerns contained in the Country Partnership Strategy between the World Bank and Jamaica was the issue that “35 percent of potential workers remained outside of the labor force and two-thirds of those have never passed a Grade 9 level test, which is a requirement to attain vocational certification” (World Bank, Country Partnership Strategy, 2010). This is an issue because foreign investors can import their capital and detract natural resources, interest payments, and capital profits, but foreign capital requires technical workers on the ground.
Jamaica recently agreed to terms with the IMF for a $750 million dollar loan with conditions, which could be finalized by the end of March 2013. This comes after a 2010 IMF-Jamaica initiative (loan) became derailed (or default). The current IMF loan to Jamaica comes with terms aimed toward a heavy push for a massive debt swap, the second debt swap that Jamaica has instituted since 2010, in which “860 billion Jamaican dollars ($9.1 billion) of higher interest local currency debt for lower-yielding bonds” (Rastello & Sabo, 2013).
Under a national debt so great, in conjunction to a barely surplus GDP (without loan payments included), is this not refinancing at the national level? If there was any doubt, “Citigroup, which worked on the country's last debt swap, has also been mandated on this occasion.” (Kilby, 2013) As a result of this second debt swap, which is basically considered a defaulted loan, Fitch has “downgraded Jamaica's credit rating one notch further into highly speculative territory, to C, while Standard & Poor's Ratings Services lowered the country's ratings to selective default” (Tadena, 2013)
Submerged in such debt, yet capable of making a surplus, why would a state take on another international loan from the IMF after the first failure in 2010, when annual debt payments outweigh their entire annual GDP? The following passages from a 2012 report on the Jamaican Economy by the Center for Economic and Policy Research provides an answer and paints a broader image:
“In the original IMF agreement, the Fund notes that, “[t]he [Jamaican] authorities anticipate that financial support from the Fund will also help unlock critical financing from other multilateral institutions.” This likely was a driving factor for Jamaica’s reengagement with the Fund.” (Johnston & Montecino, p. 4)
Unlock critical funding from other multilateral institutions?
“….citing the direct economic benefits, Shaw cites the “positive signal” it would send to their international partners, the Inter-American Development Bank (IDB), World Bank, European Union (EU) and Caribbean Development Bank” (Johnston & Montecino, p. 4)
“While the IDB and World Bank are important sources of funding for the Jamaican government, they also hold a significant portion of Jamaica’s external debt, accounting for 15.0 percent and 7.7 percent respectively. Repayments and interest paid to the IDB and World Bank partially offset the positive impact of their expenditures in Jamaica. In 2010, 1.2 percent of GDP ($159 million) went to repayments and interest to the two multilaterals. This number is anticipated to rise to $173.7 million in the current fiscal year.” (Johnston & Montecino, p. 5)
“The EU, which provides direct budget support, stopped disbursing, funds altogether after the ceasing of IMF reviews. In September 2011, the EU Ambassador told the Jamaican press, “We have already declared that we have to wait for Jamaica to re-engage with the IMF in order to continue disbursing our own funds,” adding, “We have a considerable amount of funding between now and the end of the financial year in the vicinity of US$70 million in grants for the budget, and part of the funds are quite ready to disburse as soon as the IMF issue is settled.”” (Johnston & Montecino, p. 5)
UNDP (United Nations Development Programme) and UNCTAD (United Nations Conference on Trade and Development)
I believe that the main problematic issue of ‘accepting continued international private capital credit or being completely cut-off by the international trade community’ that is facing Jamaica is evident at this point. In closing, we will briefly look at the useless organizational tentacles of the United Nations.
The last so-called contribution to Jamaica that was advertised by the UNDP was a series of Energy Conservation training courses conducted in Kingston at the end of 2012. Energy conservation is one of Jamaica’s focus areas for attempting to reduce domestic spending as they go forward against insurmountable odds of attempting to gain a second independence, this time from international capital debt. (UNDP, 2013)
The Secretary-General of the UNCTAD, Supachai Panitchpakdi, visited Jamaica in 2012 on a three day trip to commemorate the fiftieth anniversary of Jamaican foreign trade. Meeting with political leaders, Panitchpakdi stated that “Jamaica has important economic capital upon which to build its development strategies in a manner ensuring greater inclusiveness, resilience and sustainability. Among these are a competitive labour force, strong export potential in tourism and other services, including the creative industries, and the existence of a large Jamaican diaspora community and its geographical proximity to the world's largest market - the United States.” (UNCTAD, 2012) Seeing how Panitchpakdi’s visit to Jamaica was in November 2012 and Jamaica had derailed from the IMF in 2011, all this rhetoric about fifty years of foreign trade and new opportunities for development were an obvious public relation ploys encouraging a return to the international loan table, which has obviously occurred.
International Bank For Reconstruction and Development and the International Finance Corporation. Country Partnership Strategy For Jamaica for the Period 2010-2013. World Bank Report No. 52849-JM, February 23, 2010. Accessed on February 20, 2013 from http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2010/09/13/000350881_20100913101116/Rendered/PDF/528490CAS0CORRIGENDUM0R20101001914.pdf
Jamaica Agrees $750m IMF Loan Terms. BBC News, February 15, 2013. Accessed on February 20, 2013 from http://www.bbc.co.uk/news/business-21478255
Johnston, Jake & Montecino, Juan. Update on the Jamaican Economy. Center for Economic and Policy Research, May 2012. Accessed on February 20, 2013 from http://www.cepr.net/documents/publications/jamaica-2012-05.pdf
Kilby, Paul. Investors Take Fresh Look at Jamaica After Deal. Reuters, February 15, 2013. Accessed February 20, 2013 from http://www.reuters.com/article/2013/02/15/jamaica-credit-idUSL1N0BF9KW20130215
Patterson, Chris. Energy Conservation Critical to IMF Agreement – Minister Paulwell. Jamaica Information Service, February 20, 2013. Accessed on February 20, 2013 from http://www.jis.gov.jm/news/leads/33028
Rastello, Sandrine & Sabo, Eric. IMF Agrees to $750 Million Jamaica Loan on Second Debt Swap. Bloomberg News, February 15, 2013. Accessed February 20, 2013 from http://www.bloomberg.com/news/2013-02-15/imf-agrees-to-750-million-jamaica-loan-on-second-debt-swap-1-.html
Tadena, Nathalie. Moody’s Reviews Jamaica’s Rating for Possible Downgrade on Debt Exchange. Wall Street Journal, February 14, 2013. Accessed on February 20, 2013 from http://online.wsj.com/article/BT-CO-20130214-719384.html
United Nation Coference on Trade and Development. Secretary-General Visits Jamaica on Fiftieth Anniversary of Country’s Independence, November 13, 2012. Accessed on February 21, 2013 from http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=352
United Nations Development Programme. Energy Conservation and Efficiency Training, February 19 2013. Accessed on February 21, 2013 from http://www.jm.undp.org/node/629