Debt statistics 2017
|Overall international debt burden (% of GDP)||155|
|Government payments on foreign debt (% of revenue)||26.0|
|Government foreign debt (% of GDP)||59|
|Private foreign debt (% of GDP)||160|
|IMF and World Bank debt cancellation ($ billions)||0|
|Country case studies||Yes|
Country case study
The people of the Caribbean island of Jamaica have suffered from the burden of debt for 35 years, with payments constantly taking up more than a fifth of government revenue. Debt has been used by western creditors to liberalise and restructure the economy, but economic growth has been negligible, and poverty and inequality have increased. As a ‘middle income’ country, Jamaica is considered to rich by western powers to qualify for debt cancellation schemes. Since the financial crisis began, the island’s debt has increased by one-third.
At independence, the country inherited a legacy of dependence on exporting cash crops such as sugar, coffee and cocoa. As an oil importer, in 1973 the economy crashed due to the oil price shock, rapidly pushing up the costs of imports. Recession, devaluation due to the high oil price and the need to borrow to purchase vital imports rapidly increased the government’s foreign debt. When US dollar interest rates rose at the start of the 1980s, debt payments shot up; from 16 per cent of government revenue in 1977 to 40 per cent by 1984. Foreign debt payments have remained above 20 per cent of government revenue ever since.
The IMF and World Bank began lending large amounts of structural adjustment bailout loans in the 1980s, with the consequent austerity. For example, through the 1980s, the number of registered nurses fell by 60 per cent. The most drastic adjustment took place under the programme in 1989-1993, with large increases in inequality and poverty following financial liberalisation in 1991.[i] Since 1990, the percentage of children completing primary school has continually fallen, from 95 per cent in 1990 to 73 per cent in 2010.[ii]
In the 1990s, government debt had begun to fall, but in the mid-to-late 1990s a private banking crisis ensued, and government debt increased again through bank bailouts and the costs of recession. Through the 2000s the economy grew by an average of just over 1 per cent a year, before entering recession again in 2008 due to the First World Debt Crisis.
Jamaica was never considered eligible for the HIPC initiative. With GDP per person of around $6,500 (£4,000) it is considered an ‘upper middle-income’ country, and so far ‘too rich’ for debt relief. Yet the country is likely to fail to meet several of the Millennium Development Goals. For example, the under-five mortality rate has only been reduced by 14 per cent since 1990, the goal is to cut it by two-thirds by 2015.[iii]
Since the most recent financial crisis began, Jamaica’s debt has increased by one-third. In 2011/12, a quarter of government revenue was spent on foreign debt payments.[iv] In 2010, Jamaica went on an IMF programme again, borrowing $850 million from 2010 to 2012. One of the IMF’s conditions was wage freezes for public sector workers in 2010 and 2011, which given inflation, amounted to a 20 per cent real terms cut.
[i] Handa, S. and King, D. (1997). Structural adjustment policies, income distribution and poverty: A review of the Jamaican experience. World Development Volume 25. Issue 6 June 1997.
[ii] World Bank. World Development Indicators database.
[iv] IMF. (2010). Jamaica: Third Review Under the Stand-By Arrangement and Requests for Waivers of Applicability and Modification of Performance Criteria. International Monetary Fund. Washington DC. 28/12/10.