Jamaica’s austerity on test in national vote

Bloomberg

Jamaica is showing signs of revival after a lost decade of economic contraction and increase in poverty rates. In an election on Thursday, voters must decide whether they can stand several more years of the austerity the government says has underpinned the country’s recent turnaround.
Since restructuring $9 billion of debt in 2013, the administration of Prime Minister Portia Simpson Miller has imposed tough fiscal targets to tackle the heaviest sovereign debt burden in the Americas. While Simpson Miller offers more of the same, the opposition Labour Party is pledging to cut taxes for low paid workers and boost the minimum wage by 32 percent.
Jamaica will grow at the fastest pace in a decade this year, according to the International Monetary Fund’s Forecast, after boasting three credit rating upgrades over the last 12 months and the world’s best performing stock market. The Caribbean nation is entering the last stage of a four-year, $932 million IMF funding program, which the government says will help it to cut public debt to less than 100 percent of gross domestic product by 2020, from 125 percent now.
“This election has come down to whether the IMF policies will continue and whether fiscal responsibility will survive,” said Damien King, senior lecturer at the Department of Economics at the University of West Indies in Jamaica. “It’s a crucial vote on fiscal programs and economic reforms.”
The government sold local currency bonds in February for the first time in three years as investor confidence in the island returns after years of weak or negative growth. Even if GDP grows 2.1 percent this year, in line with the IMF’s forecast, the economy will still be smaller than it was in 2007.
The opposition Labour Party, headed by Andrew Holness, has criticized the lack of growth and job creation in a country with an unemployment rate of 13.5 percent. Labour is pledging a new Technology Innovation Fund that it says can turn Jamaica into “the Silicon Valley of the Caribbean”, among other proposals to boost growth.

Popularity Contest
By contrast, Finance Minister Peter Phillips stresses austerity. “Our debt is still too high,” Phillips said in a Feb. 10 interview at Bloomberg’s New York headquarters. “Fiscal consolidation is still a very necessary feature of the effort going forward.”
Simpson Miller, head of the People’s National Party, has an approval rating of 45 percent, compared to 42 percent for Holness, according to a poll of 1,200 likely voters conducted from Feb. 4-7 and published by the newspaper The Gleaner. The survey had a margin of error of plus or minus 3 percentage points.
Known as “Mama P”, Simpson Miller, 70, became the first female head of government in 2006 and returned to office in 2011. Jamaica follows the British parliamentary system, with the prime minister coming from the party with the most seats. Simpson Miller has said she wants to turn Jamaica into a republic, with a President replacing Britain’s Queen Elizabeth as head of state. “The People’s National Party has a slight lead, but that could change,” said Martin Henry, an independent political analyst and columnist for The Gleaner. “It’s a close election and we expect the campaigns to focus on turnout.”