Jamaica reduced debt at world’s third-fastest pace, says Fitch

Jamaica’s debt dipped at a pace that was ranked among the fastest in the world over a decade, according to rating agency Fitch.

“It represents the third-largest decline in debt burden among all rated sovereigns over this period; only Ireland and Iceland experienced a larger decline,” the rating agency said.

Its review encapsulated the period in which Jamaica underwent a years-long reform programme under the watchful eye of the International Monetary Fund, starting with a standby agreement that began in May 2013.

When the review window is narrowed to the start of the pandemic, in 2020, Jamaica is estimated to have reduced debt at the fastest pace of any jurisdiction worldwide.

Specifically, Jamaica’s debt dipped by 37 percentage points from the peak of 110 per cent in 2020 to the current level of 73 per cent of GDP; Ireland by 15 percentage points, from 58 per cent to 43 per cent of GDP; and Iceland by 16 points, from 77.5 per cent of GDP in 2020 to an estimated 61.6 per cent of GDP in 2023, stated Fitch.

The quality of Ireland’s and Iceland’s debt is better than Jamaica, at ‘AA’ and ‘A’, respectively. Jamaica, meanwhile, is rated ‘BB-’, which it was assigned in an upgrade this month.

Since the pandemic, most nations have seen their debt rising amid economic challenges. Even though Ireland’s and Iceland’s public debt-to-GDP ratios have declined, economists still describe them as being higher than their peers.

Jamaica’s debt was largely accumulated in the 1990s to bail out failed financial institutions. The debt also spiked in 2020 to 110 per cent with the initial reduction in the size of the economy at the onset of the pandemic.

“Aside from a COVID-19-related spike in 2020, debt-to-GDP has fallen every year for more than a decade,” Fitch said. The ratio is forecasted at 73.5 per cent in fiscal 2023-24, coming from a high of 135.3 per cent in 2012-13, the rating agency said.

Fitch expects Jamaica’s ratio to “meet the government’s 60 per cent debt target by 2028”. To meet the target, Jamaica would need to shave three percentage points on average annually off the country’s $2.2-trillion debt.

Last week, when Fitch upgraded Jamaica’s credit rating, the agency said its assessment reflected “significant” progress with debt reduction, backed by a “sound” fiscal framework and a “strong” political commitment to deliver large primary surpluses.

“Robust fiscal management has contributed to a turnaround in creditworthiness following the 2013 distressed debt exchange that Fitch considered a default,” it said.

steven.jackson@gleanerjm.com