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IMF demands could keep Jamaica in "debt trap" - Report

Published:Wednesday | May 9, 2012 | 5:30 AM

CMC – 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.

It said pro-cyclical macroeconomic policies, implemented under the auspices of the IMF, damaged Jamaica's recent and current economic prospects.

Financial observers noted 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.

CEPR said while growth has picked back up somewhat over the course of 2011. However, the high levels of poverty and unemployment will dampen any positive impact.

CEPR, the Washington based economic think-tank warns that IMF-enforced policies could keep the Jamaican economy in a "debt trap" for years.

CEPR co-director, Mark Weisbrot said that the multilaterals have favoured debt servicing over several common anti-recessionary measures, including public investment and stimulus funding.

Analysts say these policies systematically weakened Jamaican industry and safety nets, bringing down gross domestic product and making it increasingly difficult for the country to pay its external debts.

Jamaica is due to make another repayment of US$350 million in July and analysts say even if the government makes it beyond the July deadline, the new IMF deal may still take until September to finalise.