Jamaica, already well known for its music, food, and tourist sites, is now jamming on another score. The Caribbean island nation has become a poster child for how a country can tackle its high debt and start to grow again. Without doubt, the world needs more models of financial probity.
Eight years after the 2008-09 financial crisis, total world debt is twice the size of the global economy, or a record-breaking $152 trillion. This debt “overhang” is a big reason for slow growth in the global economy. It’s difficult for governments, companies, and consumers to spend when hefty bills are due. Four years ago, Jamaica was stuck in such a cycle of high debt and low growth. Its public debt was one of the world’s highest at 147 percent of gross domestic product. But then its political leaders made a wise decision.
They began to cooperate across partisan lines and in transparent ways to clean up the financial mess. They welcomed help from the International Monetary Fund (IMF) and other institutions. They reduced spending, boosted taxes, loosened labor rules, and made other reforms while also protecting services for the poor.
This year, the IMF said Jamaica’s progress has been “exceptional by international standards.” The result: Public debt is down 18 percentage points of GDP, inflation is at a historical low, and business confidence is at an all-time high. The economy is growing faster than that of the US.
One key to Jamaica’s reforms was an oversight board made up of government, business, and civil society. This body, called the Economic Program Oversight Committee, helped the country buy into the necessary austerity and ensured decisionmaking was open and fair. It also nudged the country’s main political parties to stay on the same page in support of IMF-outlined reforms. More Jamaicans have now moved away from entitlement to making a contribution.
The country still faces years of tight budgets as well as challenges such as high crime and unemployment. But as Prime Minister Andrew Holness told the United Nations last month, “For Jamaica, there is no choice. Jamaica must repay its debt and we are repaying our debts.”
The world’s debt glut can be mopped up if more national leaders work together to end the causes of excessive red ink. Jamaica may have a small economy, but it has set a big example in how, as reggae star Bob Marley sang, to “get up, stand up.”