Economists Hail Jamaica’s Sustained Debt Reduction as “Exceptional”

• Jamaica is being hailed as “exceptional” for achieving a sustained reduction in the public-debt-to-gross-domestic-product ratio (GDP), despite global financial crises, pandemics, and other emergencies.
• In a paper titled ‘Sustained Debt Reduction: The Jamaica Exception’, authors Serkan Arslanalp, Barry Eichengreen and Professor Peter Blair Henry, noted that the sharp, sustained reductions in public debt are outstanding “because public-debt-to-GDP ratios have been trending up in advanced countries, emerging markets, and developing countries alike”
• The paper was presented at the Brookings Institute in Washington on Thursday (March 28). It pointed out that governments have borrowed in response to financial crises, pandemics, wars and other emergencies, resulting in higher debt ratios. However, only in rare instances have they succeeded in bringing those higher debt ratios back down once the emergency passed.
• In the case of Jamaica, the Government was able to cut its debt ratio in half from 144% of GDP at the end of 2012 to 72% in 2023.
• The economists noted that the achievement was despite vulnerability to hurricanes, floods, droughts, earthquakes, storm surges and landslides, noting that Jamaica is ranked as the third most disaster-prone country in the world according to the Global Facility for Disaster Reduction and Recovery.
• The paper also highlighted the fact that the Fiscal Responsibility Framework, introduced in 2010, required the Minister of Finance to take measures to reduce, by the end of fiscal year 2016, the fiscal balance to nil, the debt-GDP ratio to 100%, and public-sector wages as a share of GDP to 9%.

(Source: JSE)