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Jamaica’s Debt: Exploring Causes and Strategies

Date Published: 
March, 2008
Lead Researcher(s): 
CaPRI
Thematic Area: 

Jamaica is one of the most indebted countries in the world. Jamaica’s rapid public debt accumulation between 1996 and 2003, when the public debt rose by 71 percentage points of GDP, is the stock of debt that has stayed with us. This was caused by the absorption of a large debt burden by domestic institutions during the financial crisis. Moreover, the country’s increased access to local and international bond markets increased the country’s capacity to maintain the debt burden. This paper explores the reasons for the increased indebtedness and tests the impact of three policy initiatives on the future evolution of debt, extrapolating the debt structure to provide fiscal policy guidelines. Management of contingent liabilities, tax reform for revenue gain and a focus on economic growth are needed to ensure that, as Jamaica emerges from the burdens of this debt, the episode is never repeated.

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