A new report released by the Center for Economic and Policy Research (CEPR) is warning Jamaica that its fragile economic recovery will be dangerously hampered by demands by the International Monetary Fund (IMF) and other donors.
"Pro-cyclical macroeconomic policies, implemented under the auspices of the IMF, damaged Jamaica's recent and current economic prospects," the report notes. It added that "this policy mix risks perpetuating an unsustainable cycle where public spending cuts lead to low growth, exacerbating the public debt burden and eventually leading to further cuts and even lower growth".
Financial observers note that Jamaica is currently paying more debt interest than any other country, including those in Europe that have been reeling under the near collapse of the euro. In total, the island owes around US$18 billion.
Prior to the global financial downturn, Jamaica's growth was already stagnating at just 1.1 per cent per year.
Since 2008, the island's debts have climbed by nearly a third and while growth has picked back up somewhat over the course of 2011, the report suggests that high levels of poverty and unemployment will dampen any positive impact.
The CEPR, a US-based economic think tank, in its report 'Update on the Jamaican Economy', warns that IMF-enforced policies could keep the Jamaican economy in a "debt trap" for years.
"The IMF, World Bank, IDB (Inter-American Development Bank), and other multilateral institutions deserve a large share of the blame," CEPR co-director Mark Weisbrot said in a statement, noting that "their contractionary policies prioritise the servicing of debt over growth and development."
Favoured debt servicing
Weisbrot said that the multilaterals have favoured debt servicing over several common anti-recessionary measures, including public investment and stimulus funding.
The Washington-based IMF noted last year that debt-related payments constituted some 126 per cent of national income.
The island's economy has been limping since the early 1970s, when the global oil crisis forced the country to rely more heavily on multilateral funding.
Its debt increased slowly through the 1980s, with the IMF demanding the government impose structural adjustments on the economy, including trade liberalisation and cuts to public services.