The International Monetary Fund (IMF) says Jamaica's debt is 140 per cent of gross domestic product (GDP), 10 percentage points worse than the figure used by the Government, and has warned that it could climb to a Greek-like 150 per cent, or higher, in the medium term if the Simpson Miller administration fails to push through tough fiscal reforms.
In this scenario, growth could limp along at one per cent a year.
At the same time, the Fund's executive directors stopped just short of an open rebuke of the former Jamaica Labour Party Government for failing to make good use of the opportunity provided by the rescheduling of J$702 billion of domestically held debt two years ago to begin a fundamental assault on the debt crisis.
"They regretted that the successful debt exchange under the 2010 standby arrangement (under which the IMF loaned Jamaica US$1.2 billion) had not been accompanied by fiscal consolidation to put Jamaica's public debt on a sustainable downward path," the IMF said in its assessment of a report by the Fund's staff of the Jamaican economy.
That 27-month agreement fizzled out less than a year into its life over the Fund's dissatisfaction with the Government's failure to meet fiscal targets, Jamaica having granted public-sector wage hikes and taking on unscheduled spending.
The directors, however, argued that Jamaica's current "political environment provides an opportunity" to address the problems - an apparent nod to the People's National Party's strong mandate in last December's general election and Prime Minister Portia Simpson Miller's overarching popularity.
The IMF released the report of its so-called Article IV Consultation on Jamaica on Friday, the day after Minister of Finance Peter Phillips closed the parliamentary debate on his J$612.4 billion budget for the current fiscal year, in which he imposed over J$19 billion in new taxes.
Since assuming the job, Phillips has consistently lectured Jamaicans on the unsustainability of the country's debt, officially put at J$1.66 trillion, and has accused his predecessor, Audley Shaw, of "squandering" the rescheduling that was branded the Jamaica Debt Exchange (JDX).
Under that deal, domestic bond holders accepted lower interest rates and extended maturities on the Government's debt.
But until the IMF's report, finance ministry officials, including Phillips in the Budget Debate, had marked the debt at 130 per cent of GDP of the total value of goods and services produced in the country, a fact that suggests, analysts say, that government numbers do not include the bulk of payment arrears to domestic suppliers as well as arrears in tax reimbursements to firms and individuals.
Should the Government fail to pursue corrective action, the IMF staffers warned, "real GDP growth would hover at around one per cent a year, and the sector deficit would increase to about nine per cent (6.8 per cent in 2011-12), and debt would exceed 150 per cent of GDP over the medium term".
In the absence of a change to the current fiscal and debt trajectory, Jamaica could face difficulty in rolling over its debt and demands for higher rates from lenders, as well as a flight from the Jamaican dollar - portfolio hedging, the IMF staffers called it "exacerbated by waning investor confidence".
In such a circumstance, there could be "a continued drain on net international reserves (NIR), which dipped by US$500 million between mid-2011 and March 2012, when the NIR stood at US$1.8 billion."
While welcoming Phillips' initial thrust on the public finances, the IMF's executive directors stressed that much more remained to be done.
Said the report of their analysis: "Directors encouraged the (Jamaican) authorities to press ahead with fiscal reforms. Comprehensive tax measures are needed to expand the tax base and strengthen tax administration. Directors also called for improvements in public financial management and public sector reform aimed at restraining the wage bill, advancing pension reform, and enhancing the quality of public spending. They emphasised that fiscal consolidation efforts should be complemented by an improved debt-management strategy."