The large share of public resources devoted to debt service and the wage bill has imposed severe constraints on Jamaica’s growth. The public debt- to-GDP ratio averaged 135 percent of GDP in the 2000s and bound 13 percent of GDP to debt servic- ing. In that period, wages and salaries comprised, on average, 31 percent of total expenditures, or 10 percent of GDP.
In this context, the Programmatic Debt and Fiscal Sustainability Development Policy Loans supported the reform effort towards enhancing fiscal and debt sustainability, increasing the efficiency of public financial management and budgeting processes, and improving the effective- ness and efficiency of the tax system.
The Bank supported the Government’s efforts to enhance fiscal and debt sustainability, increase the efficiency of public financial management, and improve the efficiency of the tax system. The Debt and Fiscal Sustainability Development Policy Loan series supported the Government’s reform program in seven policy areas:
- Fiscal Responsibility Framework.
- Debt Management.
- Rationalization of Public Bodies.
- Public Service Compensation and Incentives.
- Fiscal Discipline and Strategic Allocation of Resources.
- Public Financial Management.
- Tax Efficiency and Administration.
Key reforms included:
- Promoting fiscal and debt sustainability by consolidating overall public sector balances, rationalizing public bodies, and containing the wage bill.
- Improving transparency and efficiency of public financial management and budget processes by preparing timely financial state- ments, and further advances in auditing and operational capacity to improve the efficiency of budget allocation.
- Reducing distortions and enhancing the efficiency of the tax system by taking measures to broaden the tax base, reduce the number of special tax regimes and exemptions, simplify tax payment processes, and increase tax compliance.