Ever wonder what the future of The Bahamas might look like if we don’t get a grip on our out of control debt?
It is what Jamaica is suffering under today as the IMF program that has imposed the tightest and unnecessarily harshest budget in the world on the country.
Ahead of President Obama’s trip to Jamaica this week, a new paper from the Centre for Economic and Policy Research (CEPR) finds that Jamaica is running the most austere budget in the world, with a primary surplus of 7.5 percent, due to its IMF agreement, and that the government’s interest payments on the debt and austerity have brought public investment to a low.
The paper, “Partners in Austerity: Jamaica, the United States and the International Monetary Fund”, by CEPR Associate Jake Johnston notes that Jamaica has a debt-to-GDP ratio of nearly 140 percent and its public interest burden is one of the very highest in the world, at over 8 percent of GDP last year. Coupled with the IMF-backed austerity, high interest payments have all but displaced needed capital spending, reducing government capital expenditure to a low of 1.6 percent of GDP in FY 2014/15.
The paper notes that after three consecutive quarters of economic growth, GDP fell by 1.4 percent in the third quarter of 2014, and the Jamaican economy is smaller today than it was in 2008. With anaemic growth and continued austerity, social indicators have drastically worsened, with the poverty rate doubling since 2007.