Fitch Ratings has revised the rating outlook on Jamaica’s long-term foreign and local currency issuer default ratings (IDRs) to positive from stable and affirmed the IDRs at ‘B+’.

According to Fitch, the revision of the outlook reflects Jamaica’s significant progress with debt reduction, despite the pandemic shock, its stability-oriented institutional framework and favourable financing conditions, reinforced by the new International Monetary Fund (IMF) facilities.

“Public debt has resumed its declining trajectory following the temporary increase in 2020 to an estimated 85 per cent of GDP at the end of 2022, below its pre-pandemic level, although still much higher than the current ‘B’ median of 57 per cent of GDP,” the rating agency said.

According to Fitch, Jamaica’s ‘B+’ rating is also supported by World Bank Governance Indicators that are substantially stronger than the ‘B’ median.

“The ratings remain constrained by deep structural weaknesses, including a high crime rate, low productivity and weak demographics, reflected in subdued underlying growth potential, estimated between one to two per cent.”

Turning to the country’s declining debt trajectory, Fitch forecasted that general government debt to GDP will decline to 80 per cent by the end of 2023 and to around 70 per cent in 2026.

JAMAICA HAS STRONG, STABILITY-ORIENTED ECONOMIC POLICY FRAMEWORK

The rating agency noted however that meeting the Government’s 60 per cent debt target by 2028 “looks challenging”.

Sizeable primary budget surpluses, Fitch said, are expected to be the key driver of the debt decline.

The ratings agency commended Jamaica for having what it deemed a strong, stability-oriented economic policy framework that is built on two key pillars – Bank of Jamaica inflation targeting monetary policy and fiscal policy anchored on debt reduction targets.

“The policy framework proved flexible enough to cope with the double shocks of the pandemic and more recently the exogenous energy and commodity price shocks,” Fitch said.

“The Government has built a track record of fiscal prudence that has gained credibility over recent years and it will be further institutionalised by the new independent fiscal commission which will judge the compliance of the draft annual budgets with the fiscal rule.”