The Economics Show
How to cut government debt, with Robin Wigglesworth
Sep 30, 2024
Robin Wigglesworth, an expert on government debt, discusses Jamaica's remarkable turnaround from a staggering 140% debt-to-GDP ratio to halving its debt in just seven years. He highlights how political cooperation and fiscal discipline were vital in this process, allowing Jamaica to maintain significant primary surpluses. Wigglesworth also explores lessons for larger economies, and the need for growth-oriented solutions that balance debt management with middle-class welfare. The conversation paints a hopeful picture of Jamaica's potential economic future.
28:24
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Quick takeaways
- Jamaica successfully reduced its government debt by implementing strict fiscal discipline through significant primary surpluses over several years.
- The country's economic recovery was bolstered by a unique political consensus that fostered collaboration among diverse interest groups and supported reform efforts.
Deep dives
Jamaica's Economic Recovery Success
Jamaica faced an extreme economic crisis in the 2010s, marked by a staggering debt-to-GDP ratio exceeding 140%. The country had a history of struggling with International Monetary Fund (IMF) programs, often failing to meet their requirements, leading to widespread skepticism about future aid. However, with a new government in 2012, Jamaica embraced fiscal discipline and implemented substantial primary surpluses averaging over 7% of GDP for seven consecutive years. This extraordinary commitment to austerity allowed Jamaica to stabilize its economy and significantly reduce its debt burden, proving many international observers wrong who expected a collapse.
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