After four decades of little or not growth, the Jamaican economy is expected to grow at 1-2% over the medium term. The country is confronted by serious social issues that predominantly affect youth, such as high levels of crime and violence and high unemployment. Read More »
Jamaica's most pressing challenge is the country’s debt, which is currently estimated at 139.7% of GDP. Other critical development challenges include mitigating the medium-term effects of the global economic crisis and protecting social gains while moving towards fiscal and debt sustainability.
The country is working towards addressing short-term crisis and long-term development issues. While Jamaica had signed a 27 month Standby arrangement with the International Monetary Fund (IMF) in February 2010, the program went off track in late 2011. The country is hoping for a new IMF program, which could unlock budgetary support from development partners as well as financing from the international capital markets, which is currently unavailable to Jamaica.
The domestic debt exchange (JDX) in February 2010 was a success, recording a participation rate of 99.2% and resulted in notable change in the maturity profile of the domestic debt. The average maturity of the domestic debt after the JDX increased to 8.9 years from 4.5 years, lowering pressures on interest rates and improving the government’s ability to respond to shocks.
This initiative generated interest savings of at least 3% of GDP through the reduction in interest rates by 7% age points and 2% age points on outstanding domestic and US dollar denominated bonds, respectively.
The Jamaican economy is expected to grow at 1-2% over the medium term. Despite Jamaica’s impressive achievements, the country is confronted by serious social issues that predominantly affect youth, such as high levels of crime and violence and high unemployment.
The unemployment rate in Jamaica is at about 14.3% in 2012 with youth unemployment significantly higher. However, among Jamaica’s assets are its skilled labor force and strong social and governance indicators. However, to restore self-sustaining and job-creating growth, Jamaica will have to improve its international competitiveness and productivity, while also tackling urgent short-term economic and social needs.
The World Bank has worked closely with Jamaica since the country gained its independence in 1962. Since then, the Bank has been actively engaged in extending credit and development assistance to the country through several projects in various sectors, including agriculture, rural and urban development, education, infrastructural development, tax administration reform, private sector development, small scale enterprise development and telecommunications.
The Jamaica-World Bank Group Country Partnership Strategy (CPS) for 2010-2013 is closely aligned with the government's development priorities and focuses on three pillars:
Support economic stability through fiscal and debt sustainability.
Promote inclusive growth by supporting programs that strengthen human capital, prevent crime and violence and promote of rural development.
Promote sustained growth by improving competitiveness.
Jamaica’s fiscal space remains limited and the interventions identified by the CPS have been carefully chosen to help the government achieve its objectives. The Bank’s assistance centers on supporting the government’s medium-term fiscal and debt sustainability reform program, and will be complemented by six investment loans and technical assistance.
Dealing with the high unemployment rate is a key policy priority, and the Caribbean Growth Forum (CGF) and the associated Digital Jam 2.0 initiative launched in June 2012 could help youth become gainfully employed, utilizing ICT and creative industries sectors as the main vehicles.
A joint venture by the Inter-American Development Bank, the World Bank and the Caribbean Development Bank, the CGF will bring together key players within the region --private sector, the youth, civil society as well as the wider Caribbean Diaspora. The aim: to inspire a collective and inclusive solutions-led discussion about the future of the region’s potential for growth.
In Jamaica, youth unemployment is double that of the national rate. So, it is vital that any economic growth includes creating suitable and sustainable jobs which transcend social divides. Opportunities in the virtual economy satisfy that demand and Digital Jam 2.0 focuses on building the bridge between Jamaican youth and potential web based employment and entrepreneurial activities.
The World Bank currently has seven ongoing projects in Jamaica:
The Inner City Basic Services Project (US$29.3 million) seeks to improve the social, economic and physical conditions of inner city communities by providing access to basic infrastructure (roads, water, sanitation, drainage), crime and violence reduction and prevention programs, as well as access to microfinance and employment opportunities.
The Social Protection Project (US$40 million) seeks to strengthen the country’s social insurance and social assistance system and is a follow-up to an earlier loan that supported the establishment of a conditional cash transfer program.
The Jamaica Second HIV/AIDS Project (US$10 million) supports services to prevent new HIV infections and provide treatment and care for people infected and affected by HIV/AIDS.
The Rural Economic Development Initiative (REDI) (US$15 million) aims to stimulate rural economic growth through the financing of approximately 110 rural subprojects that support revenue generating activities in agriculture and tourism, as well as the provision of critical infrastructure, marketing and management subprojects in these sectors.
The Early Childhood Development Project(US$15 million) co-finances the implementation of Jamaica’s National Strategic Plan for Early Childhood Development by improving services for young children and their parents.
The Energy Security and Efficiency Project (US$15 million) supports the implementation of the government’s energy policy, particularly the goals of enhancing Jamaica’s energy security and efficiency by reducing energy costs and reducing the country’s high dependence on imported petroleum products.
The Bank also provides grant funding to Jamaica. Currently, there are about 12 grants under implementation totaling US$13.0 million.
The Fiscal and Debt Sustainability Development Policy Loan (US$100 million) assisted the government in improving fiscal and debt sustainability during an on-going and severe global financial crisis by supporting policies for macroeconomic stability and helping to improve the efficiency and effectiveness of public spending and investment decisions.
Specifically, the project supported policy actions in the following areas: (i) promoting fiscal sustainability through controlling overall public sector balances, debt generation, and rationalization of public bodies, (ii) increasing the efficiency of public financial management and budgeting processes, and (iii) reducing distortions and enhancing the efficiency and fairness of the tax system.
The Social Protection Project (US$40 million) has been successful in expanding coverage of the national conditional cash transfer program Advancement Through Health and Education (PATH) to ensure that about 14% of the population (which roughly corresponds to the poverty headcount) have access to cash transfers particularly during the food, fuel and financial crisis.
The benefit level was automatically adjusted in response to inflation and then further increased to provide additional incentives to secondary school students and boys in particular, to stay in school and finalize high school. Impact evaluation showed that PATH has substantially increased school attendance and the use of preventive health care services by children in poor families.
In addition, the project is helping working adults in PATH families to seek and retain employment through referral to the relevant support services, as well as improving public sector pension system administration.