Jamaica’s Finance Minister Audley Shaw said Greece should follow the example of the Caribbean nation and restructure the national debt as a first step toward solving its economic crisis.
“Start with that debt exchange,” Shaw said yesterday in an interview at Bloomberg headquarters in New York. “We had to do it because we had no alternative.”
Jamaica swapped $7.8 billion of local bonds for securities with longer maturities and lower interest rates last year as a debt burden exceeding 120 percent of gross domestic product threatened to stall growth in the island nation of 2.8 million people. The accord paved the way for Moody’s Investors Service to raise Jamaica’s credit rating and the International Monetary Fund to approve a 27-month, $1.27 billion stand-by credit.
“We had inherited a financial crisis of our own,” Shaw said. “The debt overhang, the persistent lack of growth, the persistent deficit that we face. Added to that came the global economic crisis.”
The national debt stood at 128 percent of GDP as of April, according to a government report issued that month. That compares with 143 percent of the GDP for Greece and 119 percent for Italy. The Jamaican dollar is fixed at about 85.6 to the U.S. dollar.
Jamaica’s efforts to reduce its debt burden received a setback this week after Prime Minister Bruce Golding said he plans to step down after four years in office. He will leave once a new ruling party leader is elected in November.
“It was a personal decision the prime minister made,” said Shaw, 59, who has been finance minister for the past four years. “It was an act of absolute statesmanship, an unselfish decision that seeks to put the country and the fortunes of the country ahead of its personal political ambitions.”
The extra yield investors demand to hold Jamaica’s dollar bonds instead of U.S. Treasuries fell by five basis points, or 0.05 percentage point, to 601 as of 1 p.m., according to JPMorgan Chase & Co.’s EMBI Global Diversified Index. The spread has increased from 400 basis points at the end of June.
The yield on Jamaica’s 8 percent bond due in 2039 fell to 8.22 percent today from a seven-month high of 8.26 percent on Sept. 23, according to data compiled by Bloomberg. Jamaica is rated B3 at Moody’s, or six steps below investment grade, on a par with Argentina and Nicaragua.
Government attempts to sell assets, attract foreign investment and foster growth, won’t be harmed by Golding’s resignation, Minister of Industry, Investment and Commerce Christopher Tufton said at the same interview.
“Jamaica is open for business,” Tufton, 43, said. “It is a natural part of the democratic process and it is important for all concerned to recognize that it is business as usual.”
Asked whether he was interested in taking over the leadership of the ruling Labor Party, Shaw said he was “qualified,” though he wouldn’t make a decision until “the appropriate time.” Tufton, who served as minister of agriculture and fisheries for four years until June, said he had the same answer.
As part of its program to raise cash, cut costs and reduce the fiscal deficit, Jamaica’s government expects to sell its stake in the Clarendon alumina refinery, controlled by New York-based Alcoa Inc., for as much as $400 million by the end of the year, Shaw said.
The Cabinet is considering two bids for the 45 percent stake, he said, without giving details. The government has lost money on the company because of a fixed-price agreement signed by the previous administration, Shaw said.
“We need to get rid of it,” he said. “The decision is imminent.”
Jamaica has already sold its sugar mills and Air Jamaica to Caribbean Airlines. Its fiscal deficit narrowed to about 6.1 percent of GDP in the 2010-11 fiscal year, according to a report by the Finance Ministry published in April. That compares with 10.9 percent the year before.
The Jamaican Stock Exchange Select Index fell 2.25 percent to 2728.53 yesterday, paring its gain for the year to 24 percent.
The country is seeking to attract foreign investment to boost growth, with the economy likely to expand more than 2.5 percent this year and next, Shaw said. GDP grew 1.4 percent in the first quarter from the year-earlier period.
“I am quite optimistic that our growth will exceed the 2 percent to 2.5 percent near-term projections that we have,” he said.
The government is working to attract investment in areas such as tourism and information and communications technology, Shaw said. Parliament approved this year a law allowing the expansion of casinos on the island nation.
“Despite the challenges of the global economy, there is money and what we have got to do is to build a platform of credibility that can attract that money,” Shaw said.