- Government wants to cut debt levels through fiscal austerity
- Local bond market successfully reopened after 3-year hiatus
Jamaica’s austerity policy that has brought three credit updates in the past year, is hanging in the balance. Voters must decide tomorrow whether to extend the rule of its chief advocate, Prime Minister Portia Simpson Miller, or vote in the opposition Jamaica Labour Party that pledges higher spending to create more jobs.
Here’s what you need to know about the election:
Among the Most Indebted
With 2.7 million people, Jamaica is the Western Hemisphere’s third-most populous Anglophone country. It’s also the most indebted, with a debt-to-gross domestic product ratio of 125 percent. The government restructured $9 billion in local debt in 2013, the second restructuring in three years. Since then, it has put austerity measures in place. Those measures have become a key campaign issue as the opposition Labour Party has pledged to cut taxes. The economy will grow 2.1 percent this year, according to the International Monetary Fund, the fastest pace in a decade.
Simpson Miller, 70, became Jamaica’s first female head of government in 2006, when she assumed the post of prime minister. After losing the elections in 2007, she returned to power in 2011. Shortly after taking office, she said Jamaica should become a republic, dropping the British monarch as the official head of state. Referred to as “Mama P,” Simpson Miller’s People’s National Party is leading in the polls.
The Jamaica Labour Party is headed by Andrew Holness, 43, who briefly served as prime minister in 2011. The former education minister says he wants to establish a new Technology Innovation Fund to turn Jamaica into “the Silicon Valley of the Caribbean”, among other measures to boost growth.
IMF to the Rescue?
Simpson Miller’s government took on a four-year financing package from the IMF in 2013 that came with requirements to cut debt. The government has won three credit upgrades in the past year. The IMF package expires next year and the next government will have to decide whether to request an extension, sign a new agreement or develop its own plan. Investors will be watching for signs the government will continue to cut its debt levels, which the government expects to fall to 100 percent of GDP by 2020 and 60 percent by 2025.
World’s best stock market
The government can point to the performance of Jamaica’s own stock exchange and domestic bond market as signs that local investor confidence is rebounding. Last year, the stock exchange recorded the world’s best performance when it returned more than 80 percent. The government capitalized on investor demand this month when it reopened its domestic bond market, which had been frozen since 2013, and successfully raised 15 billion Jamaican dollars ($124 million) through the sale of two- to 30-year notes.
China’s push into the Caribbean has extended to Jamaica, where it is investing in large-scale infrastructure projects, including a new $600 million toll road, known as the “Beijing Highway,” that is expected to be lined with several new luxury hotels after it opens this year. The next government will need to decide on the China Harbour Engineering Company’s proposed investment of at least $1.5 billion to help build a major shipping and logistics hub that would take advantage of the country’s proximity to the expanded Panama Canal. That plan is opposed by environmental groups, who say it would threaten a protected marine area off Jamaica’s southern coast.