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AID and DEBT
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Jamaica is heavily in debt. In 1996 total debt was US$4000 million – it has grown from $2000 million in 1980. The debt averages $1,616 for every Jamaican person. The GNP per person is only $1,714. The main obstacle to development in many LEDCs is huge INTERNATIONAL DEBT. The MEDCs loaned money for development projects in the 1970s and 1980s and these have to be paid back.The countries are so much in debt they can’t really pay it back but organisations like the World Bank insist the governments cut back on their spending programmes – less money for education, health etc. But why is Jamaica in debt?

 

Causes of Debt

1500 – 1838 Slave economy in Jamaica was geared to the production and export of raw materials to Europe. Products for local consumption had to be imported.

1838 – 1938 After the abolition of slavery, people either continued to work on plantations or farmed their own small plots of land. Jamaica continued to export crops.

1938 – 1962 Decline in the importance of primary products in the global economy led to unemployment in Jamaica. People emigrated to Europe and America for work. Many of the most able and hard working people left.

1962 – 1970 Jamaica gained independence but had little for development. It attracted foreign investment but had little control over decisions. Profits left the country and it remained economically dependent.

Photo: shows a Jamaican bakery that has been opened by  a migrant in New York USA.

Jamaica pays out $17.05 in debt repayments for every $1 of aid it receives.

1970 – 1980 World oil prices rose in 1973. The prices of other primary products were falling, so the gap in the balance of payments was growing. The country had to borrow money to pay for developments.

1980 – 1990 Banks increased their interest rates so Jamaica had to pay back more on its loans. The IMF loaned more money and the debts were rescheduled. But Jamaica had to agree to a structural adjustment programme.

1990 onwards – Jamaica remains highly indebted. The gap between the value of imports and exports continues to grow, making it harder to pay off debts.

Jamaica – imports and exports 1990 - 1999

Date

1990

1993

1996

1999

Imports

16 $J million

52

110

105

Exports

10 $J million

24

55

45

Balance of Trade

-6

-28

-55

-60

 

Consequences of Debt

Employment – unemployment rises and wage levels fall as structural adjustment forces the government to reduce spending. There are fewer jobs in the public sector like health and education. As people have less money to spend private companies cut back production and lay off workers. There is 16% unemployment in Jamaica.

Hospital at Montego Bay - one of 23 Jamiacan public hospitals.
Prices – as part of structural adjustment, Jamaica had to devalue its currency. This makes imports expensive and prices in shops rise (inflation). In 1979 the minimum wage of J$26 was enough to feed a family of 5 for a week. By 1999 the minimum wage of J$500 was barely enough to buy half the food a family of 5 needs.
Housing – House prices have also increased and so have interest rates for mortgages.  The price of a typical 3 bedroom house in 2000 was J$2 million and a 1 bedroom flat was J$ 1 million. Few young people can buy at this price so they share homes with their family or build their own or delay marriage (Photo

Photo: impact of air tourism

 Public Service – the biggest government spending cuts have come in health and education. In 1975 9% of government spending went on health and 18% on education. By 1996 these had fallen to 5% and 8%. The quality of these services has suffered and people have to pay for health care and education.
Transport – imported vehicles, spare parts and fuel are all more expensive, so not everyone can afford to buy or run their own car. Cuts in government spending mean less public transport and the government also raises more money through taxes on fuel, making transport even more expensive.Photo: Rioting over gas price hikes kills four in Jamaica

Food for the Poor supports the Salvation Army's efforts to diminish the devastating effect of poverty in the heart of downtown Kingston, Jamaica. Life has become very difficult for many of the residents of this impoverished community as the Jamaican economy continues to decline. Jobs are hard to come by and many of those that work still cannot afford to feed their families.
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