Public debt reduction: Jamaica and Barbados — lessons from experience
Prime Minister of Barbados Mia Mottley.

In recent years, it has become something of a fashion in academia, in the media and at the national, regional and international levels to compare Jamaica and Barbados.

Comparisons are often made in terms of politics, policies, levels of development, quality of governance, international stature and leadership. Jamaicans often read the comparisons and weep. While comparing nations is fraught and often invidious, it can be useful if the right lessons are learnt. Let's take this matter of public debt. Both Jamaica and Barbados, guided by somewhat similar political ideology and constrained by the same economic forces, on entering into negotiations with the International Monetary Fund (IMF), started off with an identification of high public debt (measured by similar debt to gross domestic prodct [GDP] ratios of about 150 per cent) as the existential problem. The objective, arrived at with "help" from the IMF, was identical — to reduce the debt to (GDP) ratio to 60 per cent. And the governments of both countries committed themselves to "fiscal prudence". Therefore, in problem identification, in policy formulation and in objective, there was little to distinguish these two Caricom partners. It was in implementation — (implementation being everything) — or more precisely, the pace of implementation, that the difference was most stark.

In 2016, when Jamaica agreed a Stand-by Arrangement (SBA) loan with the IMF, one of the primary objectives was to reduce public debt to 60 per cent of GDP by fiscal year (FY) 2025/26 by maintaining primary surplus at seven per cent of GDP for the duration of the agreement.

In 2018, when Barbados agreed an Extended Fund Facility (EFF) loan with the IMF, its debt to GDP ratio was in excess of 150 per cent, the highest among Caricom countries. The target date agreed with the IMF for bringing the debt-to-GDP ratio below 60 per cent was set at FY 2033/34. However, to accommodate fallout from the COVID-19 pandemic, that date was pushed back to FY 2035/36. And for the same reason, Jamaica's target date was also shifted by two years from the original FY 2025/26 to 2027/28.

Jamaica's Minister of Finance and the Public Service Dr Nigel Clarke..

The Barbados approach was to "avoid unrealistically high primary surpluses for an extended period of time" while remaining committed to achieve the debt target of 60 per cent of GDP. Conceding that Barbados's debt management strategy was "appropriate", the IMF has said that, "with the debt anchor target of 60 per cent of GDP pushed out by two years to FY 2035/36, the authorities should be able to achieve the target through ambitious primary surpluses in the long term. On balance, staff is of the view that Barbados's public debt remains sustainable but subject to high risks."

While Jamaica is rushing headlong to achieve its dangerously over-ambitious debt reduction target of 60 per cent of GDP ahead of its March 2028 target date, the Bajan approach is a more cautious one. It will not be rushed. It is pacing itself. The one country agreed to reach its target in 10 years; the other in 16.

One of many questions that could be posed to Jamaica's Finance Minister Dr Nigel Clarke is, why this almighty rush to reduce Jamaica's debt to GDP ratio? Another is: was it wise in the first place to have set such a punishing debt reduction pace? Third, why are you so stubbornly opposed to pacing yourself? And finally, yuh nuh fraid yuh bun out? (I have decided not to ask any awkward questions about negotiating competence and the interests represented by negotiators.)

A strong case has been made for stretching out the debt reduction period. Extending the target date, slowing down the pace and spreading out the repayment would free up fiscal resources for spending on physical and social infrastructure, including health and education, poverty alleviation, crime reduction and would help boost growth, which remains anaemic after more than a decade of bitter medicine. It would make more resources available for natural disaster resilience and climate change adaptation. There is nothing reckless, revolutionary and fiscally imprudent about this proposal, made previously by the People's National Party. It is actually quite tame. And there is the Barbados precedent.

There might just be something to learn from Barbados's leadership. But not by Dr Clarke, the best finance minister the world has ever known. As he wrote in the Financial Times in early 2019, it is he, who knows everything, who has lessons to teach small countries with big debts. Mia Mottley, it seemed, had not accepted his kind offer but nonetheless took the "right" lessons from Jamaica's experience.

In the meantime, Jamaicans continue to weep. Well, not all. Some are laughing all the way to the shaky banks.

Ambassador Emeritus Audley Rodriques served as Jamaica's senior envoy to Venezuela, Kuwait, and South Africa.

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