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.
The IMF
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.
References
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
No comments:
Post a Comment