In 2012, Jamaica celebrated its 50 years of independence from British rule in spectacular style. The Jamaica 50 Secretariat, an entity created especially for the occasion, orchestrated dozens of events across the country, ranging from galas for more than 20,000 participants to street dance festivals. Elsewhere, the Jamaican diaspora ran its own events, as did the country's embassies. Fittingly, Usain Bolt, the country's most famous and beloved athlete, won three gold medals at the Summer Olympics in London. Yet, Peter Phillips, a senior politician who at the beginning of 2012 took his highest profile role to date as minister of finance, was not in a celebratory mood.
“We were isolated from global capital markets, because the stand-by arrangement [with the International Monetary Fund] that had been negotiated by the previous administration had gone awry,” says Mr Phillips. “We were on the edge of a fiscal cliff. The situation was dire.” Indeed, Jamaica's debt-to-GDP ratio was at 140%, its net international reserves in 2013 half of what they were at the end of 2011, and GDP growth over the previous three decades among the slowest of all developing countries.
Negotiations with the IMF were long and arduous, with seemingly endless back-and-forths on where exactly the Jamaican government should implement belt-tightening measures. “At one point people said, ‘Let's sign up [to the agreement] and get it on the way',” says Mr Phillips. “But then you have to be aware that when you move from the edge, sentiments can change.”
The prolonged negotiations brought the newly appointed minister of finance a wave of criticism, but finally the four-year Extended Fund Facility agreement was reached in May 2013. Under the agreement, the IMF agreed to grant Jamaica a $2bn funding package to support reforms aiming at stabilising the country's economy and decreasing its debt ratio to below 100% of GDP by 2020.
Jamaicans, although relieved to see the agreement finally signed, are still getting used to the new measures, such as a wage freeze for public sector employees. “Now we are in the phase when a lot of people are saying ‘wow, this is extraordinarily hard’, but I think when benefits become apparent, public opinion will change again,” says Mr Phillips. Some benefits are visible already: the country's economy grew by 1.3% in 2013 (compared with 0.7% the previous year) and, according to Mr Phillips, the IMF arrangement has enabled Jamaica to attract more than $1bn in FDI.
Moreover, thanks to reforms related to starting a business, getting credit and connecting to the electricity grid, the country jumped 27 positions in the World Bank's most recent Doing Business ranking. Currently at 58th place, Jamaica is the highest ranked country in the Caribbean.
Yet Mr Phillips is still not celebrating. “The heavy lifting, such as securing the wage freeze and the exchange rate adjustments, has been done. We are off to a good start, but the race is far from over,” he says. “What we have to really focus on now is how we achieve greater levels of growth and get more better paying and sustainable jobs.”