Jamaica Seeks Greek-Style Bailout to Aid Growth, Leader Says
(Corrects third paragraph of story published March 2 to say IMF accord linked to the debt swap failed, corrects prime minister’s comments in second paragraph and adds comment from opposition party in eighth paragraph.)
Jamaican Prime Minister Portia Simpson Miller said the Caribbean island would benefit from a Greek-style bailout as it negotiates a new loan agreement with the International Monetary Fund.
“If they could give a bailout like Greece, lord have mercy, you would see Jamaica grow and flourish,” Simpson Miller, 66, said in an interview yesterday in Montego Bay. “The European countries got together and tried to do something so that they can give some serious aid to Greece. We know we would never be able to get the same level as Greece, but if we could get some consideration from countries or the IMF, we would be on our way.”
An IMF accord that included a $1.27 billion loan fell apart after the previous administration failed to share information with the Washington-based lender for almost a year, Simpson Miller said. The loan had been linked to the successful swap of $7.8 billion of local bonds in 2010 for securities with longer maturities and lower interest rates. Jamaica’s debt burden was 126 percent of GDP in 2011, according to the IMF.
The IMF accord had paved the way for Moody’s Investors Service to raise Jamaica’s credit rating and the IMF, which devised the debt exchange, to approve a 27-month, $1.27 billion stand-by credit.
The governing People’s National Party has since agreed to boost taxes and limit pensions as part of reaching a new IMF accord. Jamaica will not tax the most vulnerable, said Simpson Miller, who is island’s third prime minister since October and previously served in the post in 2006-2007.
Economic growth will rise to 2.4 percent this year from 1.4 percent in 2011, according to the IMF.
An official with the opposition Jamaica Labour Party called Simpson Miller’s statements inaccurate.
“There was no failure to share information with the IMF for one year,” Audley Shaw, a spokesman for the party on economic and finance issues, said in a statement. “The lack of several IMF reviews under the Stand-By Agreement was as a result of slower than expected pace of implementation of critical structural reforms to tax, pension and public sector wage settlements.”
Jamaica’s debt burden in 2011 ranked it the eighth most- indebted country in the world, behind only Antigua & Barbuda and St. Kitts & Nevis in the Caribbean. Zimbabwe led the list at 231 percent of GDP, with Greece fourth at 165 percent.
Argentina and Belarus
The stalled agreement with the IMF “further detracts” from Jamaica’s credit rating, Standard & Poor’s said in a Feb. 22 report. The country’s debt is rated B- by S&P, while Moody’s rates Jamaica at B3, or six steps below investment grade. The Moody’s rating puts the island of 2.9 million in the same category as Argentina and Belarus.
The extra yield investors demand to hold Jamaica’s dollar bonds instead of U.S. Treasuries has fallen 5 basis points, or 0.05 percentage point, since Simpson Miller took office on Jan. 5 to 8.14 percent, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index. The Jamaican dollar has fallen 0.1 percent this year to 86.42 per U.S. dollar.
Simpson Miller said that austerity measures to pay off debt could harm efforts to control drug gangs. Former Prime Minister Bruce Golding declared a state of emergency in 2010 to contain violence related to the extradition of an accused drug lord to the U.S.
“Criminals will be allowed to survive if we can’t provide for the peace-loving people who live in communities the gangs operate in,” Simpson Miller said.
Tourism, which accounts for about 10 percent of gross domestic product and half of foreign exchange earnings, has rebounded since drug dealer Christopher “Dudus” Coke was captured and prosecuted in New York, she said.
Gangs still control areas of Kingston, the capital, though the violence has not affected the beaches, resorts and golf courses popular with tourists on the country’s north shore.
Simpson Miller, who was Jamaica’s first female prime minister, joins a recent crop of female leaders in Latin American and the Caribbean, including Dilma Rousseff of Brazil, Cristina Fernandez de Kirchner of Argentina and Laura Chinchilla of Costa Rica.
To contact the reporter on this story: Eric Sabo in Montego Bay, Jamaica at firstname.lastname@example.org
To contact the editor responsible for this story: Joshua Goodman at email@example.com