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About Us Ministry Personnel
Corporate Plan
Organisation
Finance in Government Glossary Definitions of some commonly used terms
Territory and Population Jamaica's geographic location Constitution and Government An overview of the Jamaican government Legal System A description of the Jamaican judiciary International Organisations International organisations of which Jamaica is a member General Overview of the Jamaican Economy
Economy
Jamaica, the third largest island in the Caribbean Sea, is located 898 kilometers southeast of Miami, Florida, 144.8 kilometers south of Cuba and 160.9 kilometers southwest of Haiti. The island has an area of 11,420 square kilometers. The capital city, Kingston, located on the island’s southeast coast, is also Jamaica’s major commercial center. The natural harbor in Kingston is the seventh largest in the world. The country’s second largest city, Montego Bay, located on the island’s northwest coast, is Jamaica’s main center for tourism. The island is divided into 14 parishes. The country’s climate and topography facilitate diverse economic activities. The most prominent mountainous area is the Blue Mountain range, which peaks at 2,256 meters above sea level. The cool climatic conditions in this region make it favorable for the cultivation of the world famous "Blue Mountain Coffee". The limestone region of the country contains bauxite ore, from which alumina, a major export, is derived. The coastal regions of the island are composed of alluvial sands, gravels and loams (fertile soil). Agricultural production of export crops such as sugar cane and bananas takes place along the southern belt. The coastal areas of the northwest are famous for their white sand beaches and year-round sunshine which make them the cornerstone of the island’s tourism. From 1993 to 1997, Jamaica’s population grew at a compound annual rate of approximately 1.1%. At December 31, 1997, Jamaica’s population was estimated at 2,553,400. The last official census taken in 1991 indicated that 50.4% of Jamaica’s population lives in rural areas while 49.6% lives in urban areas. Jamaica’s official language is English; however, Patois, a dialect, is also spoken by the majority of the population. Jamaica, formerly a British Crown Colony, gained independence on August 6, 1962 and is a member of the British Commonwealth. The form of government is patterned on the British Westminster model of democracy. The Head of State is the British Monarch, who is represented locally by the Governor General of Jamaica. Traditionally, the Governor General is appointed by the British Monarch upon the recommendation of the Prime Minister. The actions of the Governor General are, in most cases, of a purely formal and ceremonial nature. National legislative power is vested in a bicameral Parliament composed of a House of Representatives and a Senate. The House of Representatives consists of 60 members elected by the people of Jamaica in general elections, constitutionally due every five years. Members select their own chairman known as the Speaker. The Senate consists of 21 members appointed by the Governor General, 13 of whom are appointed on the advice of the Prime Minister and eight of whom are appointed on the advice of the Leader of the Opposition. The President of the Senate is elected by the members. The Prime Minister is appointed by the Governor General and traditionally has been the leader of the victorious party in the polls. Usually the Prime Minister is a member most likely to command the support of the majority of the members of the House of Representatives. The principal policy-making body is the Cabinet, which is charged with the general direction and control of the Government and whose members are collectively accountable to the Parliament. The Cabinet is comprised of the Prime Minister and no fewer than 11 other members of the two Houses of Parliament. No fewer than two and no more than four must be selected from the Senate. Members of the Cabinet are appointed by the Governor General upon the recommendation of the Prime Minister. The political system is dominated by two major political parties. From Jamaica’s independence on August 6, 1962 until 1972, the Jamaica Labour Party ("JLP") formed the Government, while the People’s National Party ("PNP") assumed power in 1972. In late 1980, the JLP returned to power until February 1989, when Michael Manley led the PNP to victory and became Prime Minister. In 1992, Prime Minister Manley resigned as leader of the PNP and Prime Minister and was succeeded by Percival James ("P.J.") Patterson, who was elected Prime Minister in 1993. In 1995, a third political party, the National Democratic Movement ("NDM"), was formed by a former Chairman of the JLP. In the election held in December 1997, the PNP won 66.0% of the votes cast. In addition to the national governing bodies, local government is administered through 12 Parish Councils and a statutory corporation which administers the Kingston and St. Andrew areas. The Parish Councils, which are headed by a Chairman or Mayor, are responsible for the provision of basic services, such as public health and sanitation, poor relief, parochial roads, water supplies, fire services and markets. Local government elections are due every four years. The results of the last election, which took place in September 1998, accorded the ruling PNP full control of all the Councils. The Jamaican judicial system is based on English common law and practice and consists of local courts, a Court of Appeal and a Supreme Court. Final appeals are made to the Judicial Committee of the Privy Council in the United Kingdom. Discussions are currently taking place among a number of Caribbean nations, including Jamaica, with a view to establishing a Caribbean Court of Appeal to replace the Judicial Committee of the Privy Council. Jamaica maintains diplomatic relations with almost every nation in the world. It is a member of the International Monetary Fund (IMF) as well as the United Nations and many of its specialized agencies including the World Trade Organization (WTO), the Food and Agriculture Organization (FAO), the World Health Organization (WHO) and the United Nations Environment Program (UNEP). Jamaica is also a member of various regional and international bodies such as the British Commonwealth, the Organization of American States (OAS) and the International Seabed Authority (the headquarters of which are located in Jamaica). The following table provides a summary of various regional, bilateral and multilateral trade agreements in which Jamaica participates. See:International Organizations Jamaica operates as a mixed, free market economy with state enterprises as well as private sector businesses. Major sectors of the Jamaican economy include agriculture, mining, manufacturing, tourism and financial and insurance services. Tourism and mining are the leading foreign exchange earners. Supported by multilateral financial institutions, Jamaica has, since the early 1980’s, sought to implement structural reforms aimed at fostering private sector activity and increasing the role of market forces in resource allocation. Since 1991, the Government has followed a program of economic liberalization and stabilization by removing exchange controls, floating the exchange rate, cutting tariffs, stabilizing the Jamaican currency, reducing inflation and removing restrictions on foreign investment. Emphasis has been placed on maintaining strict fiscal discipline, greater openness to trade and financial flows, market liberalization and reduction in the size of government. During this period, a large share of the economy was returned to private sector ownership through divestment and privatization programs. The macroeconomic stabilization program introduced in 1991, which focused on tight fiscal and monetary policies, has contributed to a controlled reduction in the rate of inflation. The annual inflation rate has decreased from a high of 80.2% in 1991 to 7.9% in 1998. inflation for FY1998/99 was 6.2% compared to 7.2% in the corresponding period in FY1997/98. The Government remains committed to lowering inflation, with a long-term objective of bringing it in line with that of its major trading partners. After a period of steady growth from 1985 to 1995, real GDP decreased by 1.8% and 2.4% in 1996 and 1997, respectively. The decrease in GDP in 1996 and 1997 was largely due to significant problems in the financial sector and, in 1997, a severe island-wide drought (the worst in 70 years) that drastically reduced agricultural production. In 1997, nominal GDP was approximately J$220,556.2 million (US$6,198.9 million based on the average annual exchange rate of the period). The economy in 1997 was marked by low levels of import growth, high levels of private capital inflows and relative stability in the foreign exchange market. Recent economic performance shows the Jamaican economy is recovering. Agricultural production, an important engine of growth increased 15.3% in third quarter of 1998 compared to the corresponding period in 1997, signaling the first positive growth rate in the sector since January 1997. Bauxite and alumina production increased 5.5% from January to December, 1998 compared to the corresponding period in 1997. January’s Bauxite production recorded a 7.1% increase relative to January 1998. Tourism, which is the largest foreign exchange earner, showed improvement as well. Growth in tourist arrivals accelerated in the third quarter of 1998 and tourism earnings, increased 8.5% from January to December 31, 1998 compared to the corresponding period in 1997. Jamaica registered a balance of payments deficit of US$161.3 million in 1997, after recording four consecutive years of surpluses from 1993 through 1996. The 1997 balance of payments deficit was mainly due to a widening of the merchandise trade deficit, a narrowing of the services trade surplus that historically has partially offset the merchandise trade deficit and a substantial decrease in net capital movements. From January to October 31, 1998, the balance of payments recorded an overall surplus of US$65.1 million. The current account improved 12.7% to a deficit of US$332.8 million in 1998 from a deficit of US$381.6 million in 1997. This improvement was a result, principally, of an improvement in the merchandise trade deficit and an increase in the net services surplus. The capital account surplus increased 28.8% during 1998 compared to 1997, as a result of an increase in net private capital inflows of 46.1%. By January 31, 1999, net international reserves had recovered to a level of US$578.0 million from US$553.2 million at January 31, 1998. Since the repeal of the Exchange Control Act in 1992, the exchange rate in Jamaica has been determined by market conditions, and no announced trading band or target has been set by the Government. The Government conducts its macroeconomic policies in such a way as to maintain relative stability in the foreign exchange market. Following seven years of running a fiscal surplus, the Government posted fiscal deficits of J$24,697.1 million, or 11.8% of GDP, in FY1996-97 and J$19,962.4 million, or 8.9% of GDP, in FY1997/98. The main cause of these fiscal deficits was the fiscal cost incurred as a result of keeping inflation low and restructuring Jamaica's banking and insurance services sector. In FY1998/99, the Government anticipates a budget deficit of 7.4% of GDP. It expects to run a surplus by FY2000/01. In order to meet this target, the Government expects to increase revenues through improving tax collection efficiency. In addition, the Government plans to contain over all expenditures by limiting wages and salaries to prevailing rates of inflation, lowering interest rates, decreasing total debt service by replacing high cost domestic debt with less-expensive external debt and continuing public sector reforms to increase efficiency and effectiveness. Having achieved stability through a reduction in inflation and inflationary expectations, a decline in market interest rates and a stable exchange rate, the Government's fiscal and monetary policies seek to continue to foster a transition to sustainable economic growth. Integral to this process will be the continued strengthening of the regulatory framework of the banking and insurance industries in order to ensure the soundness of financial intermediaries. Jamaica has experienced significant problems within the banking and insurance services sector since 1996 as a result of asset/liability mismatch, weak management practices, interrelationships between affiliated banks and insurance companies and weaknesses in the regulatory system. These problems were masked during the period of high inflation, but became especially acute in 1996/97 when inflation was drastically reduced. Since 1993, the Minister of Finance and Planning (the "Minister"), pursuant to powers vested in him under the amendments to the Banking Act, the Financial Institutions Act and the Bank of Jamaica Act, has intervened in 12 financial institution groups. The Government, through the Financial Institution Services Ltd. ("FIS"), a special purpose entity, acquired the assets and assumed the liabilities of two of these groups. The assets of the remaining 10 groups were acquired by FINSAC to continue with the restructuring and reorganization of the financial sector. FINSAC is in the process of rehabilitation and plans to divest the assets as soon as they are rehabilitated. The four groups with banking as their core business have been merged to form "Union Bank". The three insurance companies will have their portfolios put to tender. At September 30, 1998, the aggregate amount of FIS’s and FINSAC’s assistance to the financial sector was approximately J$70,477 million. At September 30, 1998, FINSAC’s total liabilities were J$77,081 million while FINSAC’s total assets were J$126,770 million. FINSAC’s assets consist primarily of non-performing loans estimated at J$20,000 million, equity invested in the financial institutions and various real estate properties. The Government is in the process of estimating the market value of these assets. The collection of non-performing loans, proceeds from the divestment of real estate and proceeds from the divestment of the financial institutions are the sources of funds for FINSAC. The uses of funds consist mostly of interest and principal payments of debt issued to recapitalize the entities. The shortfall in collection of non-performing loans and divestment proceeds will be financed by the Government. Since 1997, the Jamaican Government has legislated and implemented a package of measures in conformity with the Basle Convention, which has greatly strengthened its financial regulatory system. Jamaica has never defaulted on any of its external or domestic debt obligations, which under the Jamaican constitution are given a first-priority charge on the revenues and assets of the Government. Total debt as a percentage of GDP has been falling over the past four years from 128.8% (US$5,111.4 million) in 1994 to 97.6% (US$6,047.5 million) of GDP in 1997. At December 31, 1998, total debt was US$6,562.9 million. At December 31, 1997, Central Government domestic debt was J$101,351.3 million, an increase of 30.4% compared with J$77,703.8 million at December 31, 1996. At December 31, 1998, Central Government domestic debt was J$121,014.64 million. Central Government domestic debt has been incurred primarily to provide budgetary financing, to provide assistance to Bank of Jamaica in its liquidity management objectives, to cover Bank of Jamaica’s losses, to assume debt obligations of public sector entities and to provide liquidity support to commercial banks. In addition, the Government has guaranteed certain obligations in an aggregate outstanding amount of approximately J$46,100 million at September 30, 1998, of which J$43,800 million pertain to indebtedness of FINSAC and FIS. The obligations guaranteed by the Government are not included in the Central Government domestic debt statistics set forth in this document. On the external debt side, the majority of Jamaica’s creditors are bilateral and multilateral institutions. The level of external debt has declined since 1994 due to net debt repayments and debt forgiveness. At December 31, 1997, public sector external debt was approximately US$3,277.6 million, or 52.9% of GDP, a decline of 10.2% compared with US$3,651.8 million, or 92.0% of GDP, at December 31, 1994. In 1997, 69.1% of external debt was denominated in US dollars, and approximately 8.1% was denominated in Japanese yen. At December 31, 1998, public sector external debt was US$3,306.3 million. Included in this amount was the successful offering of US$250 million 10.875% fixed rate notes due 2005, of which US$100 million was used to repay a bridge facility provided by commercial banks in 1997. See Table for Selected Economic Indicators
Page last updated : Thursday, June 12, 2003
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