Jamaica
- Total external debt: $6.5 billion
- Total external debt payments: gives $969 million each year to the rich world in debt payments.
- Population: 2.7 million
- Percentage of adults who can read and write: 79.9%
- Average life expectancy: 72.2 years
- HIV prevalence: 1.5%
- Total health spending: 2.4% of GDP (2003)
- Total spending on debt service payments: 10.1 % of GDP
- Annual GDP: $9.6 billion
(Statistics from World Bank, 2005, and UN Human Development Report, 2005)
DROP THE DEBT FAST
Jamaica is the focus of the Drop the Debt Fast on Saturday 17 May.
Background
The third largest island in the Caribbean, Jamaica became fully independent in 1962. Jamaica has a tropical climate and like other Caribbean islands, it is prone to severe weather such as hurricanes. In July 2005, Hurricanes Dennis and Emily resulted in four deaths and in August 2007 the disruption caused by Hurricane Dean led to the postponement of general elections in the country.
The mention of Jamaica often conjures up images of a tourist paradise, but the reality is far from that for the majority of the population. Away from the rich tourist resorts along the coast, many live in crowded, impoverished conditions. Twenty percent of Jamaicans live below the national poverty line and many do not have access to schools, adequate health care or employment opportunities. Current economic problems, including the declining profitability of the main sugar crop, have led to thousands migrating abroad in search of better opportunities.
Political history
Jamaica was discovered by Christopher Columbus in 1494, and was originally settled by the Spanish. England seized the island in 1655 and established a plantation economy based on sugar, cocoa, and coffee. Jamaica finally gained independence from Britain in 1962. Deteriorating economic conditions during the 1970s led to recurrent violence as rival gangs affiliated with the major political parties evolved into powerful organized crime networks, who became involved in international drug smuggling and money laundering. Violent crime, drug trafficking, and poverty pose significant challenges to the government today.
Where has the debt come from?
A recent study by the International Monetary Fund revealed that Jamaica is among the ten most indebted countries in the world. High levels of state borrowing and poor economic growth have contributed to Jamaica’s debt problems. The Manley government of the 1970s saw a number of businesses and institutions being taken into public ownership, and as the economy weakened in later years, public ownership increased as part of the government’s efforts to maintain the level of employment.
In the context of high levels of international borrowing and then rising interest rates, the result was a substantial national debt burden – the country’s debt-to-export ratio rose to over 100% between 1980 and 1985, peaking at 218% in 1985. Jamaica turned to official multilateral and bilateral creditors to finance its rising debt levels which had increased substantially by the 1980s.
Jamaica’s external debt stood at $6.5 billion in 2005. This actually fell back between 1990 and 1999, but began to increase again between 2000 and 2004. Moreover, Jamaica’s situation is a salient example of the problem of increasing domestic debt: in 2004 this accounted for 59% of the total debt. Often external debts are paid off using domestic debts, but the latter are more expensive to service because interest rates are higher.
The high debt burden has resulted in lower levels of public sector investment – essential services including health, education, infrastructure and law enforcement have suffered as a result of the country’s excessive debt payments. For example, while Jamaica’s health spending was a tiny 2.8% of Gross Domestic Product (GDP) in 2005, it spent 10.1% of GDP paying back its debts.
Debt cancellation status
Jamaica is officially classed as a lower middle-income country by the World Bank. It is therefore not eligible for the Heavily Indebted Poor Countries initiative or the Multilateral Debt Relief Initiative. Nor is it eligible for additional debt relief from the UK or other bilateral donors. This is regardless of the size of its external debt in comparison to the value of exports, its domestic debt or what Jamaica needs to spend on tackling poverty.
The New Economics Foundation calculates that Jamaica requires 87% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.
Sources of information:
Jubilee Research, Caribbean Policy Research Institute (CaPRI)
Last updated: April 2008
>> FULL LIST OF FAST COUNTRIES
>> JOURNEY TO JUSTICE: SUNDAY 18 MAY 2008
