Achieving Fiscal Sustainability: The JDX & Beyond

Date Published: 
April, 2010
Document Author(s): 
CaPRI
Thematic Area: 

For the past decade debt servicing has siphoned off half of the government’s revenue and has kept Jamaica on the brink of an economic crisis. Fiscal sustainability was finally breached during the 2009 fiscal year when the share of revenue earmarked for interest payments reached an unprecedented 66 percent. This crisis precipitated, amongst other measures, the Jamaica Debt Exchange (JDX) in February 2010. Examination of the JDX in the context of international experiences reveals that the swap drastically reduced the perceived risk of explicit default. This has turned an unsustainable fiscal situation into a potentially sustainable one. Furthermore, the exchange appears to have been well designed and conducted with sufficient skill. Although the JDX has made a material impact in the short run, it is insufficient to produce a gradually falling debt stock without the government making progress on the primary surplus.