Wednesday, March 27, 2013

Jamaica: Debt to GDP Ratio and Reform - By Any Means Necessary


            The nation-state of Jamaica is a state, classified as a developing country only fifty years out of colonialism, on the brink of complete failure.  The peril of this failure stems from a paralyzing debt to Gross Domestic Product (GDP) ratio, high levels of domestic unemployment reflecting low educational, vocational and technical levels within the domestic workforce to take advantage of foreign invested capital, and domestic instability due to excessive violent crime, corruption and drugs.  Currently Jamaica attributes 55% of the national budget toward debt with “25% spent on public sector wages, this leaves just 20% for roads, schools, hospitals and other ‘critical services’”[1]  Indications of the worsening situation were the recent downgrading of Jamaica’s credit rating “from B- to C” and warning signs that if another IMF deal was not reached that “Jamaica was likely to face ‘rising financing pressures and increased risks for macroeconomic stability’”[2]  The state of Jamaica must initiate stringent domestic reforms to increase growth, develop stability, and improve GDP to debt ratio.

            Jamaican debt to GDP ratio approximately stands at a “current level of over 140 percent of GDP” and Jamaica has been forced to seek another “Extended Credit Facility agreement with the IMF [3].  In order to acquire IMF support, Jamaica will be required to initiate several domestic reforms such as “eliminating discretionary tax waivers, along with securing a contract with public sector workers to achieve a wage-to-GDP ratio of 9 percent by 2015/2016”[4].  In addition to addressing debt issues, Jamaica is currently in the process of instituting a second domestic debt exchange program which aims to “reduce Jamaica’s debt-to-GDP ratio from 140 percent of GDP to 95 percent over the next five years”[5].  The proposed debt exchange, the “country’s second in three years”, is considered “a critical component of both the IMF agreement” that would seek “domestic holders of $860bn worth of high interest government bonds to swap them for lower interest options”[6].

            A possible positive contribution to decreasing debt to GDP ratio is the planning of the “proposed Global Logistics Hub initiative” which could “transform Jamaica into the fourth node or pillar in the global supply and logistics chain alongside Singapore, Dubai and Rotterdam”[7].  Establishing a Jamaican logistics hub would lower unemployment levels through the “training of human capital to fuel the needs of the hub” as “thousands of jobs are expected to be created in areas such as, mechatronics integration of marine engineering, (mechanical, electrical and informatics), various ship board professions such as electromechanical engineering, port operations management, heavy duty equipment operations, logistics and supply chain management” [8].  Jamaica must find economic ways of training the domestic population instead of allowing the importation of trained laborers with specialized technical skills.

            The most destabilizing factors in Jamaica are violent crime, drugs and gang activities, which often derail further capital investment by foreign corporations, and if not addressed by more stringent government methods will eventually infiltrate and debilitate the promising aspect of the Global Logistics Hub in improving debt to GDP ratio, should the hub become reality.  Jamaica currently holds one of the top murder rates in the world, which recorded “1,087 deaths last year – well down from its 2009 peak of 1,683” initiated by “poverty, gang violence and the ubiquity of guns” [9].  In order to stabilize the state, the government of Jamaica must initiate sharp reforms in the creation of gang and drug task forces, the acquisition of police technology, and the building of larger prison systems to remove the elements of community that hinder advancement for the collective population and state.  At the same time, the state must establish programs to raise poverty levels and provide technical skills in order to transform members of the inner city population into productive workers and contributors of Jamaican society.

            To alleviate a national debt that prevents development, inner-city poverty which breeds criminal activity and violence, and high unemployment stemming from a population suffering from a lack of technical vocations and available opportunities, the State of Jamaica must implement staunch domestic reforms to eliminate wasteful government spending and corruption, stabilize inner-city violence, and to provide technical training and education to create a stronger domestic work force which will keep earned capital inside Jamaica.  Under no circumstance, or international liberal complaints, should Jamaica and the Jamaican people allow the Global Logistics Hub proposal to be lost, nor allow gangs, drugs and violence to engulf the hub once it is established.  An implementation of stronger domestic reforms, enforced in the same manner of colonialism if required, is a case of long-term necessity for Jamaica and the Jamaican people.  For the state and people of Jamaica, the options are either state reform ‘by any means necessary’ or further state regression and failure.

Notes

1.  Nick Mann, “Jamaica bids to lower debt costs to secure IMF loan,” Public Finance International, February 13, 2013, http://www.publicfinanceinternational.org/news/2013/02/jamaica-bids-to-lower-debt-costs-to-secure-imf-loan/

2. Nick Mann, “Jamaica bids to lower debt costs to secure IMF loan,” Public Finance International, February 13, 2013, http://www.publicfinanceinternational.org/news/2013/02/jamaica-bids-to-lower-debt-costs-to-secure-imf-loan/

3. Caribbean Journal, “Jamaica “Finalizing” IMF Agreement, Plans Debt Exchange Offer,” February 11, 2013, http://www.caribjournal.com/2013/02/11/jamaica-finalizing-imf-agreement-plans-debt-exchange-offer/

4. Caribbean Journal, “Jamaica “Finalizing” IMF Agreement, Plans Debt Exchange Offer,” February 11, 2013, http://www.caribjournal.com/2013/02/11/jamaica-finalizing-imf-agreement-plans-debt-exchange-offer/

5. Caribbean Journal, “Jamaica “Finalizing” IMF Agreement, Plans Debt Exchange Offer,” February 11, 2013, http://www.caribjournal.com/2013/02/11/jamaica-finalizing-imf-agreement-plans-debt-exchange-offer/

6. Nick Mann, “Jamaica bids to lower debt costs to secure IMF loan,” Public Finance International, February 13, 2013, http://www.publicfinanceinternational.org/news/2013/02/jamaica-bids-to-lower-debt-costs-to-secure-imf-loan/

7. Maritime Executive, “World Bank Offers to Aid Jamaica's Logistics Hub Plans,” March 5, 2013, http://www.maritime-executive.com/article/World-Bank-Offers-to-Aid-Jamaicas-Logistics-Hub-Plans/

8. Maritime Executive, “World Bank Offers to Aid Jamaica's Logistics Hub Plans,” March 5, 2013, http://www.maritime-executive.com/article/World-Bank-Offers-to-Aid-Jamaicas-Logistics-Hub-Plans/

9.  Ross Sheil, “Imani Green murder: how violence plagues Jamaica,” The Guardian, January 13, 2013, http://www.guardian.co.uk/world/2013/jan/13/imani-green-murder-violence-jamaica

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