Opinion: The Appointment of Dr. Nigel Clarke to the IMF: Ability or reward?

Outstanding debt management! Over $3 trillion spent on a $2 trillion debt that increased to $2.3 trillion.

On 26 August 2024, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), announced her proposal to appoint Dr. Nigel Clarke to the position of Deputy Managing Director, effective 31 October 2024. She said: “Mr. Clarke is an exceptional public servant and policymaker, with proven leadership in institution building and economic crisis management, who has stewarded his country’s economy to a stronger and more sustainable position."

Personally, I believe that he is being rewarded by the IMF for continuing their ruthless austerity programme. This is what he had to say about their debt policy during the March 2024 budget debate, "Madam Speaker, we are proud of our commitment and successful efforts to so far reduce Jamaica’s debt ratio level to its lowest level in over 30 years, in the best interests of the people of Jamaica."

The Jamaican people are continually told about the debt to GDP ratio, which, according to The Gleaner has reportedly fallen under Dr. Clarke from 110% in 2020 to 72% in 2023. However, we are not informed about how much is actually owed.

In the past, I had repeatedly questioned Minister Clarke about the debt via X because it is not going down (he has recently blocked me). When the IMF intervened in 2013, the debt was almost $2 trillion, but at the end of 2023 it was $2.2 trillion.

However, I received an indirect response from the minister via his budget debate speech:-

The debt ratio is a relative debt measurement. It measures the size of the debt relative to the size of the economy. While this is being reduced, the absolute level of Jamaica’s debt has stayed relatively constant for the past several years hovering in the range of J$2 trillion to J$2.2 trillion.

So it’s not that we are “paying down” the debt in a literal sense. We are managing the government’s finances so we do not increase the absolute size of the debt, while we grow the economy so that the ratio between the size of the debt and the size of the economy gets lower each year.

Let's focus on the statement, “it’s not that we are paying down the debt.”

The management of "the government's finances" involves debt servicing, which the minister failed to mention. There are two components to debt servicing: interest payments and principal repayments, which are supposed to reduce the loan. For instance, this financial year 2024-25, $491.2 billion will be spent (37 per cent of the budget): $173.8 billion on interest and $317.4 billion toward the principal.

If we're spending hundreds of billions of JMD every year servicing the debt, why has it, "stayed relatively constant for the past several years hovering in the range of J$2 trillion to J$2.2 trillion?" So how much has been spent to achieve this "stability?"

Here is a table of the annual servicing figures since 2013 (the 2016-17 and 2021-22 figures include increases due to adjustments in the supplementary estimates for those financial years).

As you can see, under the supervision of the rescuing IMF, the Jamaica Labour Party and the People's National Party have spent well over $3 trillion servicing a $2 trillion debt. And more than half of the $3 trillion was spent on debt reduction, but the debt has increased 10%. How can this be sustainable?

What we do know is that since the intervention of the IMF in 2013, we have been subjected to severe austerity measures. Around a third of every paltry annual budget has been used to service debt, and this has resulted in a lack of funds for investment in infrastructure such as roads and bridges, transport centres, markets, proper solid waste management, and investment in the failing education and healthcare systems. 

We're not “paying down” the actual debt. But at the end of this financial year 2024-25, well over $3.5 trillion (US$27 billion) would have gone into the pockets of lenders. And it appears that we could owe them even more, because at the end of June 2024, the debt was almost $2.3 trillion. The minister claimed this management is done "in the best interests of the people of Jamaica." I disagree, but 37 per cent of the debt is held locally, so it definitely is in the best interests of a few Jamaicans.

This debt management is lauded by the IMF, and Dr. Clarke, who has managed their policies since 2018, will now join them as a director. Needless to say that I do not agree with a word of Ms. Georgieva's statement.

In regards of the debt, there needs to be a forensic audit. The fact that well over $3 trillion and counting has gone into the pockets of lenders, and we actually owe them more demands investigation. I have brought this to attention of the Major Organised Crime and Anti-Corruption Agency, the Integrity Commission and the Auditor General, but I am still waiting for a response.

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Dr. J. Lennon is an advocate for real change in Jamaica. His website is: LetsBuildaBetterJamaica.com. The views expressed are his own and not necessarily those of 18º North. Send feedback to LetsBuildaBetterJamaica@gmail.com.

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