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Jamaica labelled the 'Greece of the Western Hemisphere'

Published:Tuesday | January 8, 2013 | 10:42 AM

CMC - A leading United States newspaper today said that Jamaica’s debt crisis is in a worse financial shape than Greece and suggested that the Portia Simpson Miller administration consider a bailout plan with significant debt relief.

According to the Chicago Tribune, Jamaica has more debt in relation to the size of its economy than any other country and warned against the island becoming what it labelled “The Greece of the Western Hemisphere”.

“It has tried to restructure its loans to stretch them out over more years, at lower interest rates, with no success. Such a move would be risky for its already nervous lenders,” the paper said.

Jamaica is seeking to renegotiate a Stand By Agreement (SBA) with the International Monetary Fund (IMF), but the newspaper claimed that “more than half of its government spending goes to service its loans.

It said the country can spend barely 20 per cent of its budget for desperately needed health and education programmes.

In addition, its infrastructure is faltering, it lacks resources to fight crime, and it has little margin to recover from natural disasters such as Hurricane Sandy.

“To set itself straight, Jamaica needs a restructuring, and a bailout with significant debt relief. No way can a small economy that has limped along with growth at less than half the global average for two decades pay back the fortune that it owes,” the paper said.

Jamaica is reported to be in debt to the tune of J$1.7 trillion and the Chiacgo Tribune warned that the potential alternative to dealing with the debt could be very bad for the island.

“Defaulting on its debt would ruin Jamaica's prospects for many years to come: It would undermine the island's critically important trade relations with the US. It would discourage badly needed foreign investment in its tourism, agriculture and mining sectors. The only thing worse than doing what Jamaica must do to live within its means would be not doing it,” it said.

The paper said that the Jamaica is an extreme example of the fate that could befall Spain, Italy, Japan or, even the United States, noting that the analogy only goes so far since those much-larger economies have better resources to manage their finances.

The island's financial stewards have taken some practical steps to depreciate the local currency and curb inflation. The broader solution, however, is as obvious and necessary in Jamaica as it is in Greece and other countries mired in debt: Reform taxes, curb pension costs, cut public payrolls.

However, the paper said what really transpired is that the IMF fixes gave Jamaica a temporary lifeline, but the government never stopped borrowing and spending.

“The lesson of Jamaica is not that access to credit is bad. It's that irresponsible stewardship is bad.

We're cautiously optimistic that Jamaica's current leaders will do better,” the paper said, urging Finance Minister Dr. Peter Phillips to do whatever is necessary to reduce its out-of-control debt.

“Jamaica must make enough painful progress to win the confidence of the IMF, and of private lenders.

While the rest of us wait to see whether the island nation escapes its debt trap, we'll see whether other countries learn the lesson of Jamaica: Stop digging such deep, deep holes in the beach,” the editorial noted.

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