Abstract

Jamaica faces serious challenges to long-term growth and development imposed by a substantial debt overhang. Like many other Latin America and Caribbean countries, Jamaica emerged from the 1980s with a heavy external debt burden. The focus then had been the effective management of the external debt portfolio. The combination of external factors—such as low export earnings, reduced access to long-term loans on concessionary terms, and the internal developments of weak output performance and low revenue intake—saw the government relying on domestic financing. Consequently, by the 1990s, the high levels of external debt and attendant issues combined with the cost of rehabilitating the financial sector after the crisis in the financial sector in the mid-1990s resulted in high and rising levels of domestic debt, high interest rates, and fiscal deficits.