Jamaica's debt stock increases, but authorities say it's temporary
Jamaica's stock of public debt has increased by two percentage points to 122 per cent of gross domestic product (GDP) since the start of fiscal year 2016/17.
Jamaica’s total public debt stood at approximately $2.15 trillion at the end of November 2016. This represented a 2.2 per cent increase over the figure recorded in March. The country's GDP is approximately $1.7 trillion.
But, State Minister in the Finance Ministry, Fayval Williams said the increase in public debt is temporary and should return to its downward path in the upcoming fiscal year.
"It's timing issue in terms of when debt was raised in order to retire debt. On the one hand we've significantly reduced the risk because we were able to refinance debt that's coming due to get longer term debts on the book, but then it's caused this temporary increase that we're seeing," she said.
The increase was disclosed by officials from the finance ministry who appeared yesterday before Parliament's Public Administration and Appropriation Committee which is examining the revised budget tabled Tuesday in the House of Representatives.
"At the start to this fiscal year, the debt-to-GDP was at approximately 120 per cent. At the end of this fiscal year, we are currently looking at it at approximately 122 per cent. We need to recognise that the foreign exchange rate has a great impact in our debt," Darlene Morrison, Deputy Financial Secretary, Economic Management Division told the committee.
The issue was raised by Manchester North West representative, Mikael Phillips, who said the "aggression" in the reduction under the International Monetary Fund (IMF) programme of May 2013 to November 2016 "is not as evident now" under the three-year standby deal.
Everton McFarlane, Financial Secretary, responded that there is no change in the intent of the authorities to reduce Jamaica's debt stock and sought to explain the current increase.
"On the external side we did a major transaction round about July (last year) where we swapped out more expensive debt for less expensive debt which we did from the perspective of managing down the cost so the impact on the stock (of debt) would have been minimal," he said.
"On the domestic side, however, we engaged in more active debt reduction. In August, there were some significant transactions that we did. Those kinds of operations continue on from the PetroCaribe (debt buyback). Once those opportunities arise, our management strategy is to take advantage of those opportunities.," McFarlane added.
Morrison, meanwhile, explained that the government has been doing pre-financing activities. "We have some early payments in the first quarter of the next fiscal year and therefore what you're seeing at the end of this fiscal year is a blip. The clear downward trajectory will come back on stream next year."
The debt ratio before the IMF deal of 2013 was near 150 per cent of GDP and had crippled Jamaica's chances on the international capital markets.
The government's interim fiscal policy paper tabled in Parliament last September maintained projections for Jamaica to achieve a debt-to-GDP ratio of 96 per cent by the end of the 2019/2020 fiscal year.