Caribbean & Central America - February 2013 (ISSN 1741-4458)

*** NEW DEBT SWAP FOR JAMAICA. Jamaica has announced a new debt swap plan ahead of signing a long-awaited new agreement with the IMF. The plan is intended to reduce the country’s debt-to-GDP ratio from its current level of 140% to 95% over the next seven years. Jamaica’s total debt comes to J$1.7 trillion (US$18bn), of which J$1 trillion (US$10bn) is domestic debt. J$860bn (US$9.1bn) of this domestic debt will be subject to the new debt-swap plan.

Announcing the plan on 11 February, Finance Minister Dr Peter Philips said: “The numbers say it all: for every dollar of the budget that we spend approximately 55 cents goes to pay the debt, another 25 cents to pay wages which leaves just 20 cents to fix roads, maintain schools and hospitals and provide other critical services for the Jamaican people. It just isn’t enough.”

In 2012, Jamaica increased its primary surplus (revenues over non-interest expenditure) to 5% from 3.1% through increased taxation and cost cutting, including a reduction of the public-sector payroll by 3,000 posts. The intention now is to increase the primary surplus to 7.5%.

The new National Debt Exchange Offer, launched on 12 February, exchanges higher interest debt for lower interest debt with extended maturity but does not entail any “haircut” on the principal investment. Standard & Poor’s said on 12 February that it had lowered its foreign and local currency sovereign credit ratings on Jamaica to ‘selective default’ from B-/B.

*** AUSTERITY FOR THE BAHAMAS. The Bahamas has instructed government departments to cut their budgeted expenditure by 10%. The plan is expected to be put to parliament as part of a mid-year budget statement to be presented on 20 February. The deficit budgeted last May for 2012/13 was US$550m, or 6.5% of GDP. Overall government debt is US$4.6bn, or 54.5% of GDP.

The announcement comes shortly after the IMF concluded Article IV consultations with The Bahamas on 4 February. The lender is expecting growth for 2012 to have been 2.5% and for it to increase further over the medium term. However, it says, “pressures are projected to continue from a large external current account deficit and a rising government fiscal deficit”.

*** ALLEGATIONS OF RUSSIAN INVOLVEMENT IN GRENADA ELECTION. Grenada’s ruling National Democratic Congress (NDC) seems certain to lose power in the 19 February general election as a result of its lacklustre performance in government and its chronic divisions. However, it is not giving up without a fight. One of its allegations against the main opposition New National Party (NNP) is that it is being funded by “Russian mafia” to the tune of US$10m.

The NDC, which won the 2008 election by 11 seats to 4, is also contesting the election on the grounds that it has done the best it can given that it inherited an economy that had been “ravaged by Hurricane Ivan and a corrupt and inefficient administration” and which was then battered by the global economic crisis.

*** CRUCIAL BY-ELECTION FOR TCI. On 7 February, the Supreme Court of the Turks & Caicos Islands (TCI) ruled void the November general election results for District 7 because one of the candidates was a US citizen. The candidate in question only polled 58 votes, but the winning margin for Amanda Missick of the ruling Progressive National Party (PNP) was just 30 votes. There will now be a by-election, to be held on 22 March, and if the outcome is different and the People’s Democratic Movement (PDM) candidate wins, that would also reverse the result of the general election, which was won with 8 seats to 7 by the PNP. Missick’s seat has been declared vacant, so the parliament is now split 7-7, with two seats held by independent members appointed by the Governor.