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JamaicaJamaica’’s s Debt Debt
Why Wi Suh Bruk?
JamaicaJamaica’’s s DebtDebt 1. How Dis
Happen
2. Why Debt Important
3. How Wi Can Fix It
Public Debt LevelsPublic Debt Levels
76%76%
147%147%71%71%
Annual Debt IncrementsAnnual Debt Increments
Annual Debt IncrementsAnnual Debt Increments
Total Growth of Debt
Breaking Down Debt IncreasesBreaking Down Debt Increases
Re-valuation of Existing Debt
New Debt
Breaking Down Debt IncreasesBreaking Down Debt Increases
Re-valuation of Existing Debt
Debt Absorption
Capital Balance
Interest
Basic Balance
exch. rate X ext. debt
cap. expend. – cap. rev.
progs. + wages – tax rev.
Interest payments
remainder
Breakdown: 1997Breakdown: 1997--20032003
Debt Absorption
Capital Balance
Interest
Basic Balance
Re-valuation
Breakdown: 1997Breakdown: 1997--20032003
Debt Absorption
WhatWhat’’s the Point?s the Point?
Absorption of non-central government debt is the root of
Jamaica’s debt problem
JamaicaJamaica’’s s DebtDebt 1. How Dis
Happen
2. Why Debt Important
3. How Wi Can Fix It
According to IMF research, over 14 Caribbean countries are ranked in the top 30 most indebted
countries. Jamaica is fourth.
World Ranking - Debt
By mid-April 2008, Jamaica’s national debt was US$14 billion - almost one and a half times the
size of our GDP
Debt servicing will absorb an estimated 54 per cent of the Government of Jamaica’s revenue
The Size of the Problem
Jamaica is a middle-income country. It does not qualify for HIPC. Should debt relief be extended
to middle income countries (those with per capita income below USD $9,625)?
Jamaica’s debt per capita is USD 7,920.
Is Debt Relief the Answer?
Investment Crowding Out – the Bond Market
Inability to Have Increased Social Spending –4.4% of GDP – crime and violence
Taxes – despite surplus
Hurricane Mitigation – Climate Change Adaptation
Effects of Debt
JamaicaJamaica’’s s DebtDebt 1. How Dis
Happen
2. Why Debt Important
3. How Wi Can Fix It
● Revenue collection = no improvement
● Debt mix = 50/50 maintained
●GDP growth rate = 1.5%
1. Everything Stays As Is1. Everything Stays As Is
1. Everything Stays As Is1. Everything Stays As Is
Balanced budget in 8 years Debt/GDP < 80% in 13 years
2. Less Domestic Debt 2. Less Domestic Debt -- 56% 56% 40%40%
Balanced budget in 7 years Debt/GDP < 80% in 13 years
3. More Multilateral Debt: 21% 3. More Multilateral Debt: 21% 42%42%
Balanced budget in 7 years Debt/GDP < 80% in 12 years
4. No Absorption of Debt from Public 4. No Absorption of Debt from Public Sector EntitiesSector Entities
Balanced budget in 6 years Debt/GDP < 80% in 10 years
Taxes: 4 Taxes: 4 -- 7% More Revenue7% More Revenue
Balanced budget in 3 years Debt/GDP < 80% in 9 years
GDP Growth: 3% GDP Growth: 3% 6%6%
Balanced budget in 4 years Debt/GDP < 80% in 7 years
● Recommendations Identify and manage contingent risks Implement tax reform for quick revenue gains Spend on growth rather than pay down debt
ThereforeTherefore……
The EndThe End
