Durrant Pate/Contributor

Jamaica has garnered more accolades for its magnificent debt management over the last decade, with the recognition that it is one of the only countries to have halved its debt in just 10 years.

French daily afternoon newspaper, Le Monde, has singled out Jamaica’s debt management over the last 10 years as an example for other indebted countries. Jamaica has relied on two pillars to reduce its public debt: the introduction of a new fiscal law and increasing government revenues.

The new fiscal law, which was passed in 2010, obliges the minister of finance to achieve a balanced budget by 2016, as well as the imposition of a cap on public sector salaries at 9.0% of Gross Domestic Product (GDP). Exceptions to these rules are provided for in the event of natural disaster or crisis, as occurred during the COVID-19 pandemic.

Hailing Jamaica’s debt turnaround

These were the findings of ‘Sustainable Debt Reduction: The Jamaican Exception’ by Serkan Arslanalp, Barry Eichengreen and Peter Blair Henry, published in the Brooking Institute’s Brookings Papers on Economic Activity in March 2024.

In 2013, Jamaica was dubbed the “Greece of the Caribbean,” with its debt reaching 146% of GDP and its repayment alone accounting for half of public spending. Ten years later, the island’s debt level has fallen to 73.5% of GDP.

“No other country, apart from Iceland and Ireland, has recorded such a performance over this period, a trajectory made all the more exceptional by the fact that the debt burden continued to rise everywhere else, especially after the COVID-19 pandemic,” highlighted Le Monde. It is set to reach all-time highs of 120% of GDP in developed countries and 80% of GDP in emerging countries by 2028, according to International Monetary Fund projections.

This turnaround in Jamaica’s debt situation is mainly due to increased government revenues from an improvement in tax collections. It has put an end to numerous tax loopholes and increased income tax, particularly on the higher brackets.

Also, these tax laws have often not been respected. To ensure that they are, the newspaper cites that Jamaica has worked hard to build a broad consensus: The solution to the debt problem is also political. The government has brought civil society players, union representatives and opposition parties to the table to arrive at a reduction plan that is as fair as possible.

The publication highlights that without consensus, it would have become hostage to political divisions and would have disappeared in the event of a changeover. An independent committee was set up to monitor the evolution of the debt and the reforms implemented, quarter by quarter.

Their members even travelled across the country, with their reports under their arm, to explain why debt reduction was important. In concluding, Le Monde suggested that “the top civil servants of France’s finance ministry would be well advised to visit Jamaica. While public debt has been swelling all over the world, sparing no nation, rich or poor, the small Caribbean island is one of the few to have cut its own by half, in just 10 years”.