Jamaica Suffering Under The Most Severe Austerity Budget on The Planet: Report

At the behest of the International Monetary Fund, Jamaica now has the most severe austerity budget on the planet.

Jamaicans have been subjected to continuous declines in their standard of living as a result of strict austerity measures.

A recent release by the Center for Economic and Policy Research finds that Jamaica has a primary surplus of 7.5 per cent, due to a four-year economic support programme with the International Monetary Fund (IMF).

The rising surplus is a measure of how much the government rakes in subtracting how much it spends, excluding interest payments and indicates that there is a massive gap between public revenue and public spending.

A major portion of these public funds is being used to pay Jamaica’s incredible debt. Jamaica’s debt-to-GDP ratio is nearly 140 percent and it incurs some of the highest interest payments in the world according to the report.

The paper titled Partners in Austerity: Jamaica, the United States and the International Monetary Fund notes that after three consecutive quarters of economic growth, GDP fell by 1.4 per cent in the third quarter of 2014, and the Jamaican economy is smaller today than it was in 2008.

“With anaemic growth and continued austerity, social indicators have drastically worsened, with the poverty rate doubling since 2007. Unemployment, at 14.2 per cent, remains higher today than during the height of the global recession,” it said.

“When President Obama travels to Jamaica this week, he will be going as someone partly responsible for the high unemployment and poverty that the country is suffering through,” said report author Jake Johnston. “This paper shows that through its leadership role in the IMF, the U.S. is imposing unnecessary pain on Jamaica through harsh austerity and a debt trap.”

Now in the third year of its second IMF program since 2010, Jamaica is being asked to run the most austere budget in the world, running a primary surplus of 7.5 percent of GDP. Interest payments,  while down from their peak, are still some of the highest in the world and they continue to crowd out needed capital investments. If not for financing from Venezuela and China, the economic downturn would likely be vastly worse.  

After cutting off new loans in 2012 following the breakdown of the first agreement with the IMF,  Jamaica actually paid more to its multilateral partners (IMF, IDB and World Bank) than it received for two years. In 2014, Jamaica experienced a net outflow of $136.9 million, or about 1 percent of GDP, to the IMF alone. While Jamaica has begun receiving new loans from the World Bank and IDB, the country owes these two institutions a combined $650 million through 2018.

“Alternatives to IMF-imposed austerity are key if Jamaica is going to emerge from its debt trap and begin economic recovery. Perhaps most important would be debt cancellation” said Johnston.

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