Credit: IMF Photo/Scott McIntyre
Jamaica is known for sun, sand, and reggae. It also deserves to be known for an exceptional record of debt reduction, after cutting its public-debt-to-GDP ratio from 140 percent in 2012 to just 62 percent in 2024.
How did Jamaica accomplish this? Most immediately, it did so by running very large, persistent primary budget surpluses averaging more than 6 percent of GDP for more than a decade.
But this answer raises a further question: How did Jamaica achieve a consensus on the need to run such substantial surpluses with the goal of more than halving its public debt, and how did it implement and maintain the requisite policies?
In a 2024 paper we argue that three elements combined to make the country’s successful debt consolidation possible: a coherent set of rules and procedures, effective consensus-building efforts, and an independent fiscal oversight body.
First, the government adopted a clear and coherent set of fiscal rules and procedures. These highlighted the pressing debt problem, encouraged formulation of a multiyear plan for addressing it, and limited fiscal slippage. The fiscal responsibility framework introduced in 2010 required the minister of finance to target eliminating the budget deficit and reducing the debt-to-GDP ratio to no more than 100 percent by the end of fiscal year 2016. In 2014 that framework was augmented, requiring a multiyear plan to reduce the debt ratio to 60 percent by 2026, a timeline later postponed to 2028 during the COVID-19 pandemic.
Importantly, the framework included an escape clause to be invoked in the event of significant shocks. This prevented the rule from being so rigid as to lack credibility. Asserting that under no circumstances would the government respond to natural disasters and other exceptional events with emergency spending would not have been credible. The escape clause required a threshold shock to the budget of 1.5 percent of GDP before the government could invoke the provision. Activation also required independent validation by the auditor general, an official whose autonomy is guaranteed by the constitution, thereby avoiding opportunistic behavior by elected officials.
The framework corrected institutional weaknesses that had caused deficit overshooting in earlier years. It obliged the finance minister to submit to Parliament a fiscal responsibility statement describing the overall strategy for meeting the mandated targets. The minister was also required to report and explain deviations between fiscal targets and outcomes, project the government’s finances over the coming three years, and specify the assumptions behind revenue and spending estimates.
Second, in 2013 the government, political opposition, labor unions, and employer associations negotiated and signed the Partnership for Jamaica Agreement, a consultative and consensus-building arrangement. It explicitly acknowledged the unsustainable nature of the debt burden and the importance of taking a long-term approach to solving the problem. It emphasized the principles of transparency, accountability, and consultation and was designed to create confidence among all parts of society that the burden of fiscal adjustment would be widely and equitably shared.
Third, the country created the Economic Programme Oversight Committee (EPOC) in 2013 to monitor and report on the implementation of the IMF program, initially to reassure investors in government bonds, but then also to independently verify that all parties to the Partnership agreement were keeping to the terms of their bargain. Its 11 members represented public sector employees, trade unions, business, and finance.
Keen to make permanent the fiscal transparency that marked EPOC, Parliament then provided a legal basis for a permanent and independent fiscal commission to “provide an informed second opinion on fiscal developments, and…play a constructive role in informing the public and, in so doing, incentivizing adherence to Jamaica’s fiscal rules.” In January 2025, the Independent Fiscal Commission officially took effect, headed by a nonpartisan, statutorily protected public officer with a seven-year term and counseled by the five-person Fiscal Advisory Committee. By devolving power to an independent body, the government further entrenched its commitment to debt consolidation.
Thus, these three elements—a coherent set of rules and procedures, effective consensus-building efforts, and an independent fiscal oversight body—combined to make possible the country’s successful debt consolidation.
What was it about Jamaica’s circumstances that moved leaders to adopt these arrangements and enabled them to reach this consensus? Prior to 2013, the country had been wracked by nearly four decades of political, economic, and financial crises. To better manage and resolve these crises, leaders began to experiment with independent, nonpartisan commissions and institutions as vehicles for a solution.
In 1979, in the wake of disputed elections, Parliament voted to create an independent, nonpartisan electoral advisory committee to monitor and validate electoral results. In 1989, it created the National Planning Council, bringing together government officials as well as business, labor, and other private sector members to address the economy’s weak economic performance. In 1997 it established ACORN, a venue for social dialogue in which labor leaders, the private sector, and academics met on an ongoing basis to build trust among key sectors of Jamaican society, with the goal of enhancing economic growth and competitiveness. In 2009 the government, opposition, business, trade unions, and civil society groups formed a consultative body called the National Partnership Council to address the effects of the global financial crisis, as well as long-standing economic and social issues.
The country’s fiscal arrangements built on these precedents and on the experience acquired through their operation. When government debt reached crisis levels after 2010, that knowledge and institutional apparatus were transferred to the fiscal domain.
Economists prefer to ground their arguments in institutions and market forces, as we do here. But such institutions presuppose leaders with the vision and character to use them for the good of the country. Jamaica was fortunate in this regard. Debt reduction continued even when there was a change of government from the People’s National Party to the Jamaica Labour Party in March 2016. Furthermore, the new government took steps to further strengthen Jamaica’s fiscal rules, with the creation of a new Fiscal Commission. In April 2018, Parliament initiated the consultative process that culminated in passage of the 2021 Independent Fiscal Commission Act.Institutions matter, but they are only as effective as the people who lead them.
There is a coda to this story. In October 2025, Jamaica was struck by Hurricane Melissa, a Category 5 storm that caused widespread flooding and extensive damage to infrastructure, housing, and agriculture. Preliminary estimates place reconstruction costs at $8.8 billion, or 41 percent of GDP, half of which is expected to be borne by the public sector.
In response, the government quickly assembled a comprehensive package to finance Jamaica’s recovery and reconstruction efforts, drawing on a layered disaster risk financing framework it had built over the years. In parallel, it invoked its fiscal escape clause, suspending the requirement to target the 60 percent debt-to-GDP ratio. The Independent Fiscal Commission then validated the government’s judgment that the fiscal impact of the hurricane, at 5.3 percent of GDP over the 2025–29 period, significantly exceeded the legislative requirement for a one-year suspension of the rules. Independent verification that the escape clause trigger was met, together with the country’s positive track record, reassured the markets. Remarkably, none of the major credit rating agencies downgraded the government’s bonds following either the storm or suspension of the rules.
Public debt is forecast to rise to 68 percent of GDP in 2026 before stabilizing and resuming a gradual downward trend. The 60 percent debt-to-GDP ratio is now expected to be met with a delay of two years by 2030.
Other countries presumably dream that they might match Jamaica’s achievement. Additional Caribbean countries have followed its example by adopting fiscal rules, forming independent fiscal councils, and working to forge a social consensus around fiscal reform. It is past due time for more countries, with both advanced and developing economies, to start turning this dream into reality. Jamaica shows that it can be done.
BARRY EICHENGREEN is the George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley.
SERKAN ARSLANALP is an advisor to the managing director at the IMF.
PETER BLAIR HENRY is the Class of 1984 Senior Fellow at Stanford University’s Hoover Institution.
