1 Introduction In August 1991 the United States government announced that it was to 'forgive' US$217 million of debt owed to it by the government of Jamaica. The declaration, a first step in the Bush administration's Enterprise of the Americas Initiative, followed a similar write-off the previous year of C$93 million by the Canadian government. A further series of debt-forgiveness arrangements and reschedulings are now in force or under negotiation. Britain, Germany, Japan, the Netherlands, and the so-called Paris Club of rich, industrialised nations have all agreed to postpone or cancel their claims to money owed to them by Jamaica. Such steps are undoubtedly welcome and have been greeted with enthusiasm by the Jamaican government. Prime Minister Michael Manley described the US initiative, for instance, as 'one of great historical significance for Jamaica'. But they should also be seen within the overall context of the Jamaican debt crisis: •According to Jamaica's Central Bank estimates, the country's debt currently stands at US$4.38 billion, amounting to approximately US$1,800 per head of the population. • Debt servicing (the repayment of interest and principal to lender institutions) eats up 40 per cent of the foreign exchange earned by Jamaican exports. • The 'forgiven' and rescheduled debts are mostly from lowinterest and concessional loans on a bilateral governmentto-government basis. Jamaica's debts are largely fixed at prevailing US interest rates and are owed to multilateral lending organisations such as the International Monetary 2 Jamaica: Debt and Poverty Fund (IMF) and the World Bank. These agencies neither forgive nor reschedule debts. •The US government initiative actually increases Jamaica's short-term debt-servicing burden as it is conditional on the accelerated repayment of other non-forgiven debt. •The Jamaican government currently pays out more each year to financial institutions and commercial lenders than it receives in loans and grants. In May 1991 Prime Minister Michael Manley told journalists in the US that the country would pay out US$150 million more than it would receive that year. In response, the World Bank has pledged to lend Jamaica between US$80 million and US$90 million annually between 1991 and 1995. And so the vicious circle of borrowing and repayment continues. 'The government of Jamaica', writes Kari Polanyi Levitt, 'is in de facto receivership to the multilateral agencies'. Unable to honour its existing debt obligations without access to more funds, it is forced to borrow more, notably from the World Bank and the IMF. In June 1991 the IMF board agreed a loan of US$59 million for the financial year 1991. Finance Minister P.J. Patterson also announced that the Jamaican government intended to approach the IMF for a three-year Extended Fund Facility rather than acting on a yearly basis. No loan from the IMF or World Bank comes without conditions attached. The IMF lends money, principally for balance-of-payments purposes, on condition that governments implement 'stabilisation' programmes. The World Bank, for its part, insists on 'structural adjustment' policies in the economy as a whole. As the so-called lender of last resort (to which governments only turn when bankrupt), the IMF can demand policy changes in return not only for its loans, but also for recommending to other financial institutions that they should lend to the government in question. Stabilisation and structural adjustment packages are now familiar throughout the Third World. They include the reduction of state intervention in the economy and the promotion of private-sector growth; the favouring of exports over domestic consumption as a means of earning foreign currency with which Introduction 3 to honour debts; austerity programmes in public-sector spending and wages as mechanisms for reducing budgets and domestic demand; the privatisation of state assets and increased usercharges for social services; high interest rates in order to discourage consumption; and the devaluation of local currency in order to make exports more competitive and imports more expensive. The IMF continually monitors governments' adherence to such programmes. There are quarterly 'tests', carried out by teams of IMF consultants which governments pass or fail. This book traces how Jamaica has followed this economic recipe. It follows the process since 1977 in which successive Jamaican governments have undergone a mounting economic crisis, growing indebtedness and an often controversial relationship with the IMF and the World Bank. It examines why Jamaica turned to the IMF, what it received, and what it has had to pay out in return. In particular, it looks at the impact of these institutions' policies on the most vulnerable sectors of Jamaican society. The shrinking dollar Two IMF recommendations have recently had specific repercussions for Jamaica's poor. One has been the abolition of food subsidies, traditionally a protective measure for the poor but viewed by the IMF as a 'market distortion'. In line with this thinking, the Jamaican government abolished subsidies on basic imported foods in May 1991. It also announced that the Jamaica Commodity Trading Corporation was to lose its monopoly on importing certain essential items. This state company, established in 1974, imported foodstuffs and medicines and distributed them to consumers at subsidised prices. The IMF further recommended that the Jamaican dollar should be allowed to find its 'appropriate level'. In other words, it wanted the Jamaican government to let the currency float freely against the US dollar, leading to the devaluation which would make Jamaican exports more attractive. In September 1991 the government lifted all foreign exchange controls, thereby scrapping its special access to foreign currency through the 4 Jamaica: Debt and Poverty Central Bank and allowing the free movement of local and foreign currency. The move followed a dramatic depreciation of the Jamaican dollar over the previous year from J$8.00: US$1.00 to J$14.00: US$1.00. In the first month of free trading the Jamaican dollar fell a further 9 per cent, reaching J$18.00: US$1.00. The foreign-exchange liberalisation was intended to put an end to black-market dealing and make US dollars and other hard currency more easily available. It also contributed, however, to the rapid depreciation of the Jamaican dollar. Because Jamaica is so dependent on importing basic goods from abroad, a drastic devaluation has an immediate and disastrous effect on ordinary consumers. Foodstuffs such as flour, rice, fish, and tinned milk are often imported and paid for with US dollars. The collapse of the Jamaican dollar, as well as the removal of subsidies, is passed on directly to the consumer who has seen food bills double within a year. At the same time, IMF-approved austerity policies are designed to hold down wages to a level under the rate of inflation. As a result, income cannot possibly keep pace with prices. For those without work the situation is even worse. The Jamaican government has tried to offset the impact of the structural adjustment measures on the poorest by additional welfare payments and support programmes. In the 1991 budget it allocated J$407 million to schemes such as food stamps, school feeding and old-age assistance. Yet however well-intentioned and effectively targeted, these schemes cannot compensate for the drastic price increases and deteriorating services experienced by most Jamaicans. Stories of poverty The interviews in this book, commissioned by Oxfam in October 1991, illustrate how Jamaicans in almost every sector of society have been affected by rising prices and collapsing living standards. They also provide examples of how essential social services - health, education and housing - have been run down in the last ten years by reduced government spending. The stories they tell are of inadequate housing and dilapidated hospitals, unavailable medicines and demoralised teachers. They Introduction 5 tell of a grim daily struggle to pay for food, clothing and transportation - even on the part of people who ten years ago would have been considered middle-class and comfortably off. The growing impoverishment of .the majority of Jamaicans is revealed by several telling statistics: • In 1989 over 30 per cent of children attending public health clinics were diagnosed as malnourished. • I n 1971 there was one doctor for every 2,700 people in Jamaica; today there is one doctor per 5,200 Jamaicans. •In 1989 it cost on average J$l,119 to send a child to primary school, 60 per cent of this sum going towards lunch and 25 per cent towards 'fees'; at the same time, the statutory minimum weekly wage stood at less than J$100. •According to World Bank figures, the consumption of the richest ten per cent of Jamaicans is 17 times greater than that of the poorest 10 per cent. Whether in the squalid 'ghettoes' of western Kingston or the impoverished rural communities of St Catherine's, the toll exacted by the economic crisis is clearly visible. The crisis has many dimensions and takes different forms. In desperation, some people turn to crime. Burglaries, robberies, larceny, drugdealing are all on the increase. In response, the police resort to brutality and frequent killings; in 1989,180 Jamaicans were killed by the police. The fastest growing economic sectors in Jamaica are now drugs - and the security industry. Domestic violence, child abuse and drug-dependency are all serious problems. Seeking solutions For some Jamaicans the solution to their economic difficulties lies in escape. Throughout the late 1980s and early 1990s annual emigration figures have stood at between 30,000 and 40,000, or 80 per cent of the estimated population increase. The Jamaican diaspora, mostly now in the US but also in Canada and Britain, provides a lifeline to some families by sending back regular remittance cheques. Yet massive migration is also a sign of hopelessness, removing many qualified professionals such as doctors, nurses and teachers, from the development process. 6 Jamaica: Debt and Poverty As the formal economy collapses, the so-called informal economy grows. The number of Jamaicans involved in informal trading and services is steadily increasing. The small importers and traders, known as 'higglers', are very often employed in the formal sector at the same time. Their informal activity importing goods from other Caribbean territories, selling clothing or electrical items on the street - allows them to supplement their inadequate formal-sector earnings. Others have been made redundant from their formal-sector jobs and have no option but to work in the precarious world of street-vending. There are also Jamaicans who see possible solutions not simply in individual terms, but through working with others in their communities. Both in the urban and rural areas of the island there are groups which attempt to escape from poverty by starting small-scale enterprises and associations. These community-based initiatives may be agricultural - producing food for local consumption - or they may be involved in producing other goods and services. In many cases they are encouraged and supported by local NGOs and by agencies such as Oxfam. The Oxfam programme in Jamaica emphasises the importance of community self-organisation, not only as a basis for economic activity but also as a means to obtain access to better services. There is much debate among Jamaicans, whether involved in such organisations or not, about the debt crisis and its possible solutions. High on the list of priorities is the idea of increased self-reliance, of reducing Jamaica's costly and illogical dependence on imported foodstuffs and essential goods. This would imply a conscious policy shift towards domestic production and import-substitution. There is also the widespread belief that the Jamaican government should reduce, or stop altogether, its borrowing from the IMF and World Bank. This reflects the attitude of many that the poor received little benefit from the borrowing of the 1980s yet are being asked to bear the brunt of the resulting structural adjustment policies. Few people would advocate a unilateral cessation of debtservicing, however; popular ideas are that Jamaica should pay only a fixed percentage of its export earnings in debt Introduction 7 repayments, or that repayments should be postponed or reduced by agreement with the IMF and World Bank to manageable proportions. In the current climate of 'forgiveness' it remains to be seen whether the international financial institutions would contemplate such a serious reduction in Jamaica's crippling burden of debt. Until they do, Levitt's image of Jamaica as a drowning man will remain sadly appropriate: Jamaica is in the position of a drowning man, treading water to keep afloat, but slowly drifting further offshore. Cries for help in the form of annual begging missions to bilateral donors, and acceptance of new loans from official agencies carrying conditions of the kind already described, have produced just enough assistance to keep the country afloat, and able to service debt, for a few more months, hopefully even years. Reschedulings, debt write-off, and grants by the bilaterals, whose loans are, on the whole, softer than those of the Fund and the Bank, are enabling Jamaica to continue to service mulilateral debt which, as is well known, cannot be rescheduled or refinanced.2 8 Jamaica: Debt and Poverty Spreading fertiliser in a sugar plantation. Workers are not given adequate protection, and suffer skin and other health problems.