The headline ‘Jamaica’s journey from IMF joke to star pupil is now complete’ in the Financial Times Alphaville (FTAV) August 28 article was prompted by Finance Minister Dr Nigel Clarke’s appointment to the position of a deputy managing director at the International Monetary Fund (IMF).

The author, FTAV editor Robin Wigglesworth, observes: “The turnaround is striking, because not long ago the suggestion that a former Jamaican finance minister would hold one of the top IMF jobs would have seen you laughed out of 700 19th Street,” which is where the IMF is located in Washington, DC.

The opening line of his piece is actually from his previous article in 2019 entitled ‘Inside the IMF’s outrageous, improbably successful Jamaican programme’. Wigglesworth reported that when Jamaica signed its IMF programme in 2013, most of the fund’s staff were so sure the country would fail it that they often opened internal follow-up meetings with a sardonic joke: “Has Jamaica crashed yet?”

Former regional Inter-American Development Bank (IDB) head Gerard Johnson had a bird’s-eye view of both programmes. “The Washington institution provided unprecedented financial support for a set of historic reforms, including a fiscal rule, tax reform, and public sector transformation,” he wrote, adding, “The failure of the 2010 programme created an almost unattainable high bar for 2013.”

Johnson also noted: “For all of 2012 and throughout the first quarter of 2013, Jamaica unsuccessfully sought an agreement with the IMF on a new programme. After the 2011 reversal, the IMF was demanding unattainable prior conditions, including a crippling primary fiscal surplus, a significant devaluation, haircuts on both internal and external public debt, and the reinstatement of the abandoned 2010 reforms. Basically, the IMF did not want a deal since acceptance of the extreme terms would have destroyed the Jamaican economy. It was only through timely and wily political intervention by the US Black Caucus, prompted by the new PNP Administration, that Madam Lagarde was prompted to direct that a real programme be presented to the board. Jamaica had a path to macroeconomic stability, but it was the most demanding programme in recent IMF history.”

Wigglesworth notes, “Jamaica’s path from butt of jokes to IMF darling was started by his [Clarke’s] predecessor Peter Phillips, of the Opposition People’s National Party. It was Phillips who shepherded the country through the first grim years of the 2013 programme.” He adds, “He deserves credit for…doing it incredibly well. Perhaps most of the credit”.

In a pre-COVID-19 interview commenting on the programme, then leader of the Opposition Dr Phillips observed that, “There was a trust deficit. After the failure of the first IMF programme there was a reluctance from key IMF officials to give us a new programme. Their strategy was to make us crash first.”

“The first breakthrough came at the IDB meeting in Panama City in March 2013 with Alejandro Werner, who had replaced the former head of the Western Hemisphere in late 2012, who had been the head when the 2010 IMF programme collapsed. The key was a change in personnel at the fund.”

Wigglesworth observes scepticism was understandable, as “some thought that Jamaica’s 16th IMF programme was simply a cynical ploy to keep the show on the road long enough for the fund to extract more of its resources already tied up in the country from old, failed programmes”.

Dr Phillips observes: “It was probably too extreme to say the fund was not negotiating in good faith.”

Joking that a decade later, with Clarke’s appointment as a deputy managing director, Jamaica is taking over the IMF, Wigglesworth quotes approvingly the IMF managing director: “Mr Clarke is an exceptional public servant and policymaker with proven leadership in institution-building and economic crisis management, who has stewarded his country’s economy to a stronger and more sustainable position. Since 2016 he has been the IMF’s chief counterpart on successive and historically successful programmes for Jamaica, including an Extended Fund Facility, a precautionary Stand-By Arrangement, and most recently a Precautionary Liquidity Line plus Resilience and Sustainability Facility, leaving the country with robust economic fundamentals. Nigel also brings a wealth of experience from a stellar private sector career.”

Wigglesworth notes that “Clarke did more than simply continue on the same path”, citing the reforms mentioned by the IMF below.

Clarke’s first announced reform was the May 2018 creation of an independent fiscal commission (which should begin its task shortly), and included central bank independence, tax policy, public body governance, public procurement, a very difficult public sector compensation reform, and public investment management reforms.

He also led Jamaica’s economic policy response to the COVID-19 pandemic with innovative and well-targeted policy support and completed privatisations and public-private partnerships of major infrastructure assets. Jamaica implemented a multi-layered disaster risk financing model (now paying out after Hurricane Beryl) and became the first small country to independently sponsor a catastrophe bond with World Bank assistance. In 2023, Jamaica successfully completed its first-ever international issue of a local currency denominated bond, a landmark achievement for a relatively small country.

In a January article, quoted in a Jamaica Observer editorial last week, Wigglesworth had described the country’s economic performance over the past 10 years as “arguably one of the most remarkable and radical but underappreciated turnaround stories in economic history”. With Jamaica now the poster child of the so-called Washington consensus, and, in Wigglesworth’s words “a lot of other big IMF programmes already an unholy mess” he jokes that maybe Jamaica should send some of its officials to DC, to paraphrase him, to sort stuff out. However, one should note that IMF expertise is macroeconomic stability and not growth, as they will tell you.

In future articles we will review what the Washington consensus meant when the term was coined, what it means now, and some thoughts on how to complete our journey towards growth.