September 26, 2020

Jamaica offers economic advice to Greece

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Athens, Greece

Jamaica’s Finance Minister Audley Shaw said Greece should follow the example of the Caribbean nation and restructure the national debt as a first step toward solving its economic crisis.

“Start with that debt exchange,” Shaw said yesterday in an interview at Bloomberg headquarters in New York. “We had to do it because we had
no alternative.”

Jamaica swapped $7.8 billion of local bonds for securities with longer maturities and lower interest rates last year as a debt burden exceeding
120 percent of gross domestic product threatened to stall growth in the island nation of 2.8 million people. The accord paved the way for Moody’s Investors Service to raise Jamaica’s credit rating and the International Monetary Fund to approve a 27-month, $1.27 billion stand-by credit.

“We had inherited a financial crisis of our own,” Shaw said. “The debt overhang, the persistent lack of growth, the persistent deficit that we face. Added to that came the global economic crisis.”

The national debt stood at 128 percent of GDP as of April, according to a government report issued that month. That compares with 143 percent of the GDP for Greece and 119 percent for Italy. The Jamaican dollar is fixed at about 85.6 to the U.S. dollar.

Jamaica’s efforts to reduce its debt burden received a setback this week after Prime Minister Bruce Golding said he plans to step down after four
years in office. He will leave once a new ruling party leader is elected in November.

Audley Shaw

‘Absolute Statesmanship’

The extra yield investors demand to hold Jamaica’s dollar bonds instead of U.S. Treasuries rose by 8 basis points, or 0.8 percentage point, to
615 yesterday, the highest level since January 2010, according to JPMorgan Chase & Co.’s EMBI Global Diversified Index. The spread has increased from 400 basis points at the end of June.

“It was a personal decision the prime minister made,” said Shaw, 59, who has been finance minister for the past four years. “It was an act of
absolute statesmanship, an unselfish decision that seeks to put the country and the fortunes of the country ahead of its personal political ambitions.”

Government attempts to sell assets, attract foreign investment and foster growth, won’t be harmed by Golding’s resignation, Minister of Industry, Investment and Commerce Christopher Tufton said at the same interview.

“Jamaica is open for business,” Tufton, 43, said. “It is a natural part of the democratic process and it is important for all concerned to recognise that it is business as usual.”

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