Advancing Jamaica's development with the World Bank and IDB – Jamaica Observer

Eleven days after taking charge of the World Bank Group, Mr Ajay Banga, the new president, is scheduled to make a historic trip to Kingston this week. The World Bank is the world’s largest multilateral development bank, owned by 190 member countries, which promotes long-term economic development and poverty reduction.
President Banga will visit Jamaica on his very first overseas trip. This will also be the first visit of any World Bank president to Jamaica. This is significant. Among other things, it speaks volumes about the opportunities for development that Jamaica has earned for herself.
This is a historic moment for another reason too. Kingston will also host, at the same time, the new president of the Inter-American Development Bank (IDB) Mr Ilan Goldfajn. The IDB is the largest multilateral financial institution in the Western Hemisphere, owned by 48 member countries. Jointly, the combined assets of the two institutions amount to over three-quarter trillion US dollars.
These simultaneous Jamaican visits by the leadership of two vast multilateral institutions come at a time of great uncertainty for many of the world’s emerging market economies, as the world is hit by shock upon shock. In many countries, an overhang of debt from the policy responses to the COVID-19 crisis, and the global inflation shock, threaten economic and financial stability. The developing debt crisis is compounded by tightening global financial conditions, through rising global interest rates and other monetary policy actions focused on taming inflation, making it more difficult for many countries to access market financing at a time when policy space has been mostly exhausted.
Against this background, Jamaica’s economic performance through these crises has garnered international attention. Jamaica’s policy interventions have been targeted and economic recovery has been swift. During 2022, employment surpassed pre-COVID levels, and the level of economic output in real terms at end December 2022 surpassed output at end 2019. While some countries can rival these achievements, Jamaica stands in rare company for attaining this economic recovery while also having reduced debt substantially relative to end-December 2019.
However, Jamaica’s differentiation is not limited to the pace and quality of our economic recovery. We also used the time during the crises to strengthen institutions, build resilience and pursue reform. COVID-19 did not derail our plans for central bank independence. Rather, in a global environment of social distancing, working from home, and almost universal mask wearing, we completed the legislative processes that institutionalised inflation targeting and monetary policy independence. It could not have come at a better time.
The Bank of Jamaica used its independence to be one of the first countries to mount an early, credible and forceful response to the inflation crisis even as some segments of the business community pushed back. Point-to-point inflation cooled to 5.8 per cent in April 2023, inside the target window, after 19 months of inflation outcomes that have been higher than the upper bound of the target range. While the central bank has cautioned that it’s too early to declare victory, the reversal of Jamaican inflation to target range ahead of advanced countries, such as the United Kingdom, is a staggering demonstration of the transformative power of policy discipline.
Also, during the COVID period, Jamaica became the first small country in the world to launch an independently sponsored catastrophe bond with the assistance of the World Bank and the support of bilateral partners: the US, UK, and Germany. While much of the world was in COVID-19 induced lockdown we also passed legislation to create an independent fiscal commission.
At this time, though risks remain, the Jamaica macro-economic story is unlike any other in the world, and positively so. As such, while we have long been known internationally for our music, culture and sport, Jamaica is now experiencing international acknowledgement for its macro-economic performance. This performance has delivered tens of thousands of new construction, tourism and BPO jobs, supported record growth in company incorporations and provides the platform for further achievements that improve quality of life.
A legacy of Jamaica’s past macroeconomic instability, in the context of a globalised labour market for the highly skilled, is the loss of much of the locally well-trained technical talent to overseas markets. An important implication of the newfound macro-economic stability is that we are likely to have the opportunity to take on development projects over the medium term that are outside of Jamaica’s institutional experience in size, scope and/or focus.
This introduces risks that have the potential to derail our hard-earned stability. While this is a natural phase of the development cycle, we have to be humble about our current national limitations to avoid costly errors. In addition, the capital required for infrastructure development projects exceeds the capacity of government many times over.
We have an opportunity now to significantly advance Jamaica’s development agenda through strategic partnerships and deeper engagements with the World Bank and the IDB. There is no other institution with more technically skilled and globally experienced development policy talent than the World Bank. And within our hemisphere the IDB is unmatched in development expertise with globally competitive practices in many sectors.
We therefore intend to leverage Jamaica’s macro-economic stability, and our credibility with these technically resourced institutions to accelerate Jamaica’s pace of development. Across the medium term we intend to crowd in up to US$1.5 billion of private sector infrastructure investment through public-private partnerships (PPPs) and other infrastructure procurement modalities through open, competitive and transparent processes. As a transaction advisor with a development bias, the private sector arm of the World Bank, the International Finance Corporation (IFC), has unparalleled global expertise. The opportunities are ripe to partner with them to bring to market, possibly, highway, broadband, healthcare, water, sanitation, and other infrastructure projects.
The IDB also has tremendous PPP advisory capacity and has provided Jamaica with a project preparation grant window to assist in bringing such projects to market. In addition, the IDB is raising capital from its 48 member countries to expand the capacity of its private sector window. We intend to position Jamaica to benefit from this increased firepower. Meanwhile, we are “doubling up” with the IDB’s innovation arm, IDB Labs, to nurture entrepreneurial capacity within the small and medium sized enterprise space.
Our development will be hampered without significant improvements in education outcomes. At the Government of Jamaica’s (GOJ’s) invitation the World Bank completed an insightful public expenditure review on education spending, benchmarked against global peers. The GOJ hopes to continue to work with the World Bank on improving learning conditions in schools, the application of information technology in the education sector and on the implementation of the prime minister’s vision of STEM schools.
As we strive to improve domestic value-add, and so boost growth and incomes, the GOJ aims to again partner with the IDB on round two of the global services skills project even as we work with them to achieve greater food security with impactful agriculture projects. The GOJ also hopes to work with the IDB to transform healthcare delivery through the construction and upgrade of hospitals and health centres.
Digitisation of government services promises to lower costs, reduce processing times and boost productivity. It provides the best chance for leapfrogging and bypassing traditional phases of development. However, this is an awesomely complex undertaking with many pitfalls. The IDB is ideally positioned to assist and the World Bank has valuable global experience to share.
Our partnership with the World Bank recently delivered the social pension product, which now benefits thousands of elderly Jamaicans. The GOJ intends to build on this collaboration to produce an unemployment insurance scheme for the Jamaican people as well as meaningful social welfare reform.
As global interest rates rise, multilateral borrowing becomes more attractive as a source of funding as compared with international capital market alternatives. However, Jamaica and other middle-income countries, as determined by GDP per capita, have more limited access to concessional multilateral funding. The Caribbean has long argued that, in the allocation of multilateral financing opportunities, vulnerability ought to incorporate a multivariate perspective rather than the singular focus on GDP per capita. The International Monetary Fund responded and Jamaica recently accessed a low interest US$764 million Resilience and Sustainability Facility.
There is, therefore, much to discuss in Kingston this week, and we welcome Mr Banga and Mr Goldfajn, as we work with them and their teams to advance Jamaica’s agenda during this defining period of development opportunity.
— Dr Nigel Clarke is minister of finance and the public service and member of parliament for St Andrew North Western
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