In light of former Finance Minister Dr Nigel Clarke’s recent departure, there has been much discussion about Jamaica’s current macroeconomic successes. Some attribute these successes solely to the policies of the Andrew Holness Administration, while casting the People’s National Party (PNP) as the antithesis to proper economic management.

Adding to this narrative, newly appointed Finance Minister Fayval Williams recently issued a statement regarding the economic achievements of the last PNP Administration (2012–2016). Her remarks reflect a broader message from her boss, Prime Minister Holness, and the Jamaica Labour Party (JLP), aiming to minimise the PNP’s contributions to Jamaica’s macroeconomic progress and claim full credit for the current stability. Yet a closer look at the facts reveals that today’s macro-fiscal stability is a product of policy continuity across political administrations.

The PNP, under the leadership of former Prime Minister Portia Simpson Miller and with Dr Peter Phillips as finance minister, took on the challenging tasks of addressing the deeply entrenched fiscal problems. Their efforts were crucial in setting the country on its current path to macro-fiscal stability, a trajectory that continues to benefit Jamaicans today.

The JLP’s Audley Shaw, finance minister during the party’s 2007-2011 Administration, had attempted reforms to address the fiscal challenges at the time, including the enactment of the Fiscal Responsibility Framework (FRF) and the Jamaica Debt Exchange Programme (JDX), which was a prerequisite for the International Monetary Fund’s (IMF) Stand-By Arrangement (SBA), a fiscal consolidation programme. However, efforts at fiscal reforms were short-lived due to the Administration’s own missteps.

Inherited Economic Challenges and Immediate Reforms

When the PNP took office on January 5, 2012, the country’s economy was in crisis, and an economic collapse seemed inevitable. The fiscal deficit for financial year (FY) 2011/2012 was 6.2 per cent of gross domestic product (GDP), while the current account deficit stood at a daunting 12.8 per cent of GDP. Inflation was at 7.3 per cent in FY 2011/2012, according to the Government of Jamaica’s Fiscal Policy Paper.

The JLP had failed to complete its SBA with the IMF in 2011, causing the programme to be suspended, derailing economic stability, and leading to a breakdown in relations with international financial institutions. As a result, Jamaica was shut out of international capital markets, with funds from the IMF, World Bank, and other partners no longer available.

Trevor Alleyne, the then IMF mission chief to Jamaica, captured the severity of that period in an interview with the Financial Times, stating, “They [the JLP-led Government] did it without consulting us. That’s when I knew the programme was in trouble.” His words underscored the lack of sensible management that ultimately led to the programme’s suspension, damaging Jamaica’s economic stability and credibility with international partners. During all this, Prime Minister Holness was the Leader of Government Business in the House of Representatives and a senior Cabinet minister.

Facing these economic headwinds, the PNP acted swiftly, adopting a policy of fiscal responsibility and prudent management. The main priority was to secure a new IMF arrangement to provide critical funding, restore investor confidence, and prevent an economic collapse.

Securing the IMF Agreement

Securing an IMF agreement to rescue Jamaica from the brink of economic collapse was no small feat, especially given the strained relations left by the JLP-led Government’s handling of the previous SBA.

Dr Phillips, in an article written by the Financial Times, recalled, “My first few weeks were spent in a dialogue of the deaf…there was a view that it would take a complete collapse to force Jamaica to change. My job was to convince Washington that we were serious this time. But there was a big trust deficit.”

After difficult negotiations and leveraging political capital with allies in the United States, the PNP secured a four-year, $932.3-million Extended Fund Facility from the IMF in May 2013. While the agreement provided less funding than the previous arrangement, it spanned a longer period, allowing Jamaica time to regain fiscal stability.

Despite widespread scepticism, the PNP Government passed every IMF review and exceeded expectations.

A key component of the new IMF programme was maintaining a primary surplus of 7.5 per cent of GDP — one of the highest globally, surpassing even the IMF’s requirements for countries like Greece. The PNP upheld this target from FY 2013/14, navigating a restrictive budget while keeping the economy stable and carrying out the functions of government. Tax increases at the time were necessary to generate sufficient revenue to meet the required primary surplus to continue receiving support from the IMF.

Unlike the JLP, which has operated with a lower primary surplus in recent years, the PNP managed to maintain fiscal discipline under challenging domestic conditions. This fiscal restraint at the time limited the Government’s ability to increase spending on necessary infrastructure and salaries, but it was essential for regaining macro-fiscal stability and international trust.

Structural Reforms

To ensure long-term economic health, the PNP Government implemented wide-ranging fiscal and tax reforms aimed at simplifying tax administration, broadening the tax base, and generating sustainable revenue while reducing compliance costs. Key initiatives included the Omnibus Incentive Regime of 2013, which introduced new tax incentives for large-scale projects and replaced outdated tax waivers; the Tax Arrears Write-Off of 2013, which eased uncollectible tax arrears to facilitate compliance; and the Collective Investment Scheme of 2014, which expanded investment options and increased market stability.

The Administration’s broader tax reform road map, developed with the Inter-American Development Bank, outlined further simplifications and administrative changes within Tax Administration Jamaica (TAJ) and Jamaica Customs Agency (JCA). In 2013, both agencies gained increased autonomy, with the JCA becoming an executive agency and TAJ a semi-autonomous revenue agency (SARA).

The PNP also tackled pension reform, an area critical to Jamaica’s fiscal sustainability. Working with the World Bank, the Administration approved a white paper on pension reform in 2013, aiming for a modern, efficient pension system by FY 2016/17. This reform underscored the PNP’s commitment to safeguarding Jamaica’s economic future.

Debt Reduction and Fiscal Discipline

Debt reduction was a priority for the PNP, which implemented several strategies to lower the debt-to-GDP ratio. These included enhanced debt management, such as the National Debt Exchange (NDX) in 2013, which helped reduce debt service costs; strengthened the fiscal rules; and secured low-cost multilateral funding from international partners to address critical needs.

These measures had yielded substantial results. Jamaica’s fiscal deficit was eliminated, achieving a 0.4 per cent surplus of GDP by FY 2014/15; the public sector surplus rose to 1.4 per cent of GDP in FY 2015/16; and the current account deficit in the balance of payments improved significantly, decreasing from 8.1 per cent in FY 2013/14 to 2.4 per cent in FY 2015/16, remaining near 3.0 per cent over the medium term.

In 2015, inflation dropped to 3.7 per cent and was the lowest rate seen in nearly five decades. By February 2016, fiscal year inflation had further eased to 3.1 per cent. This period of economic progress did not go unnoticed; both Standard & Poor’s and Moody’s raised Jamaica’s credit rating in June 2015, with Fitch following suit in early 2016. Additionally, Jamaica made significant strides in the World Bank’s Doing Business 2015 report, climbing 27 places from 85th to 58th among 189 countries.

Legacy of Fiscal Responsibility and Foundation for JLP’s Policies

Many of the JLP’s initiatives today continue the fiscal policies laid out by the PNP. For instance, the recent public sector compensation review builds upon the 2015 wage agreements signed by the Simpson Miller-led Administration with the Jamaica Confederation of Trade Unions. This agreement included provisions for a comprehensive compensation review.

The PNP’s steadfast commitment to fiscal discipline laid the foundation for the JLP’s subsequent actions. By the time the PNP left office in 2016, Jamaica’s economic trajectory was secure, with sustainable fiscal surpluses and improvements across the board.

Cleveland Tomlinson is the junior Opposition spokesman for finance and planning.