30 The Americas The EconomistNovember 9th 2019
2 differentfromothercountriesintheAmer-
icas such as Ecuador, where riots in Octo-
ber forced the government to restore subsi-
dies to fuel prices. In 2016 the opposition
Jamaica Labour Party narrowly won an
election by accusing the ruling People’s Na-
tional Party of “passing the imf’s tests, not
the people’s test”. Once in power Labour re-
alised the imf’s tests were the people’s test.
Uma Ramakrishnan, who led the imf’s
missions to Jamaica, says citizens’ interest
in and understanding of the programme
“has been a source of amazement for us”.
The imfis almost as familiar to Jamai-
cans as Marley or Usain Bolt. The country
has spent 34 of the past 57 years under its
tutelage. In 1980, after protests against an
imf agreement that mandated wage
freezes and cuts to welfare, the then-prime
minister, Michael Manley, broke it off.
When Jamaica signed on to a new agree-
ment in 2013 its economic reputation was
in tatters. It had defaulted on its bonds four
times and restructured foreign loans eight
times since 1981. Public debt at the start of
the programme was 147% of gdp, making it
one of the most indebted countries in the
world (see chart on previous page). Income
from tourism and bauxite, the main earn-
ers of foreign exchange, had plunged in the
aftermath of the global financial crisis. The
unemployment rate was soaring.
The imfhad ended Jamaica’s previous
27-month agreement, signed in 2010, be-
cause the government failed to meet its tar-
gets. In 2013 Jamaica was in desperate need
of another. Capital was fleeing the country.
In March the country’s foreign-exchange
reserves were not sufficient to pay for two
months’ worth of imports. The People’s Na-
tional Party government, then recently
elected, sent the finance minister, PeterPhillips, to Washington to plead with the
imffor one last chance. It agreed to lend Ja-
maica $958m over four years, perhaps only
to avoid being accused of applying double
standards. It had just extended a lifeline to
similarly troubled Greece.
In addition to the ambitious primary-
surplus target and the wage freeze, Jamaica
was obliged to seek relief from private-sec-
tor creditors in the form of longer maturi-
ties and a lower interest rate. This hurt Ja-
maican banks and businesses, which had
replaced foreigners as the biggest lenders.
Rather than resist, they and public-sector
trade unions decided to make sure that the
government would keep its promises to the
imf, in the hope that this would finally end
recurring economic crises.
That was the origin of epoc, which acts
as connective tissue between the govern-
ment and citizens. The 11-member group
has monthly meetings with top officials
from the central bank and the finance min-
istry. It holds gatherings like the one in
Trench Town, which give citizens an outlet
to express their views besides protest.
It helped, too, that Portia Simpson-
Miller, the prime minister until 2016, advo-
cated the agreement. “The poorer seg-
ments of society have a great deal of respect
for her,” says Ralston Hyman, a trade
unionist who is a member of epoc. In 2018
the Bank of Jamaica drummed up support
for inflation targeting by commissioning
reggae stars to extol in song the blessing of
low and stable inflation. “If it’s too high,
the people have a cry/And if it’s too low, the
country nah grow,” ran one lyric.
Although it set tough targets, the imf
gave Jamaica flexibility in meeting them. It
agreed to a “social-spending floor” that
ring-fenced spending on such services asschool meals and poverty relief. Austerity
affected more the quality of services, espe-
cially health care. This summer the Jamaica
Observer, a newspaper, reported that pa-
tients at Kingston Public Hospital had died
because it lacks such equipment as mri
scanners and microscopes.
The Labour Party exited the agreement
in 2016, replacing it with a standby arrange-
ment. Although this was similar to the pre-
vious agreement, it introduced a higher in-
come-tax threshold (to help low earners)
while increasing indirect tax (which is
harder to evade) on alcohol, tobacco and
fuel. Like the previous agreement, Jamai-
ca’s graduation “is absolutely a bipartisan
achievement”, says the finance minister,
Nigel Clarke.
Jamaica had good luck, too. In 2015 it of-
fered a lump sum to repay debt to Venezue-
la, which it had incurred buying oil at a dis-
count. Venezuela accepted to relieve its
own economic problems, which cut Jamai-
ca’s debt ratio by ten percentage points.
Prices of alumina, which is extracted from
bauxite, rose until 2018, reviving the min-
ing industry. Tourism picked up, helped by
stronger global growth. China financed in-
frastructure projects, which created jobs.
Jamaica is leaving its imfprogramme in
better shape than when it entered. Its debt
ratio has plunged. The country has $3.5bn
of foreign-exchange reserves, about eight
months’ worth of imports. Financial regu-
lation has been strengthened. The tax base
has been widened and the revenue-collec-
tion agency has been reformed.
But graduating with good marks from
the imfis not the same thing as economic
success. Growth is likely to be around 1%
this year. The Jamaican dollar is weaken-
ing, which is hurting businesses that im-
port many of their inputs. Underinvest-
ment in infrastructure holds back future
growth. Despite business-friendly rules,
the recovery of foreign investment has
been modest and, after a recent decline in
alumina prices, may now falter.
Corruption continues to sap confi-
dence. Jamaica’s murder rate, the second-
highest in the world, scares away investors
and tourists. Reducing it to the world aver-
age would boost the economic growth rate
by 0.5 percentage points, reckons the imf.
The economy remains vulnerable to ex-
ternal shocks. A global recession would re-
duce tourism and remittances from Jamai-
cans abroad, which accounted for around
16% of gdpin 2018. Good economic man-
agement cannot stave off hurricanes.
Still, Jamaica is more resilient than it
was in 2013. “The first responsibility of
adulthood is paying your own bills,” muses
Mr Phillips. The current government plans
to replace epocwith an independent “fis-
cal council”, which will monitor budget
discipline. More than 50 years after inde-
pendence, Jamaica is coming of age. 7More bananas. Fewer banana peels?