Economists Dr Gene Leon and Dr Damien King oppose the view that Jamaica should consider ramping up inflation in order to slash the real value of its more than J$1.7-trillion debt.
The benefits may not outweigh the costs. And it might be good for debt sustainability but bad for households and investment, they argue.
Jamaica has been told that it needs to get its debt within a range of 75-96 per cent to service without wrecking the economy. The new International Monetary Fund (IMF) agreement is structured around the top end of that range, which Jamaica aims to reach by 2020.
But while inflation would reduce the real value of money, it also reduces the real value of savings and real returns on investment. The inflation rate is currently performing at around 9.1 per cent.
"There are no quick fixes," said King, head of the economics department of the University of West Indies, Mona.
"The point is that you need to do a cost-benefit analysis. If you inflate the debt, interest rates would get higher and investment will fall. Higher inflation will be inimical to growth and inflation is bad for the poor. So you will have lower debt but you are messing up the rest of the economy."
Leon, the outgoing IMF Resident Representative for Jamaica - who along with King were participants of a Gleaner Editors' Forum on the IMF agreement on Wednesday - argued that one cannot look at the economy in "silos".
"If you inflate away the debt, then you would obviously help your creditors from one side or yourself, the debtor, from the other side. But that inflation has implications from all other sectors from a confidence perspective, investment perspective from an uncertainty perspective and stability perspective," Leon said.
He added that debt elimination by itself fails to address the issue of lack of growth and competitiveness. He hypothesised that even if "God" eliminated all of Jamaica's debt without the ills of inflation, the country could return to the same high debt levels.
"What guarantee would you have that it would not get back to the same level," he argued.
Jamaica's debt is nearly one anda half times the size of the economy, at 147 per cent, or one of the highest in the world. King recalled that the rise in debt occurred in the mid-1990s with the bailout of the financial sector, the assumption of debt related to airline Air Jamaica and the National Works Agency.
Last month, Government and the IMF agreed to a US$932-million Extended Fund Facility (EFF) spanning four years. The EFF will support the Government's comprehensive economic reform agenda and forms a critical part of a total funding package of US$2 billion from Jamaica's multilateral partners.
Jamaica will review its debt by May 2014 to include an assessment on whether further measures are needed to hit the 96 per cent target.
The Government concluded a domestic debt swap as a pre-condition to the IMF agreement aimed at slashing an annual 7.5 per cent off the debt ratio, and is currently working on a debt-asset swap plan, equivalent to less than one per cent of GDP, to be delivered by the end of this month.
However, the IMF acknowledges that more measures may be necessary, including on the external component of the debt. In this regard, Jamaica has already "approached the Paris Club to explore options for debt relief," the fund said.
Any new debt-reduction measures would be implemented by February 2015, according to the IMF-Jamaica reform programmme.