Four Years On: Bruce Golding Steps Down as the Economy He Stabilised Faces Its Next Political Test

On 25 September 2011, Bruce Golding announced he would not seek re-election as Jamaica Labour Party leader and would leave office once his successor was chosen. He departed an economy that had, by the metrics of the IMF programme, recovered considerably from the crisis he inherited — but a political environment so corroded by the Dudus affair that his personal standing could not survive it. What he left behind was a fiscal architecture, an incomplete adjustment, and an open question about whether any incoming administration would choose to complete the work.

• Prime Minister Golding announces exit on 25 September as Dudus damage mounts
• GDP grows 1.4 percent in 2011, first positive year since the crisis
• Inflation falls to 7.5 percent, the lowest in several years
• IMF Stand-By Arrangement approaching final phase as scheduled term nears
• Tourism and remittances continue anchoring external account stability
• Andrew Holness emerges as Golding’s likely successor at JLP helm

The announcement, when it came, was brief. On the afternoon of 25 September 2011, Prime Minister Bruce Golding told the Jamaican public that the challenges of the previous four years had taken their toll, and that it was appropriate to make way for new leadership to continue the programmes of economic recovery and transformation. It was, for a politician of Golding’s ambition and longevity, a measured and dignified exit. The damage that the Christopher Coke affair — the botched extradition process, the Tivoli Gardens operation, the parliamentary falsehoods and their correction — had inflicted on his credibility had made any other outcome politically implausible.

But the economics of the moment were, for once, cooperating. Jamaica’s GDP grew by approximately 1.4 per cent in real terms in 2011 — the first positive reading since the global financial crisis had produced consecutive years of contraction. Inflation, which had reached 12.6 per cent in 2010, had fallen sharply to 7.5 per cent. The exchange rate was stable. The Net International Reserves, having risen by US$442 million in 2010, were holding at levels that provided the external cushion that the SBA had been designed to build. By the metrics of the programme he had signed in February 2010, Golding’s economic legacy was real, if incomplete, and would not have been easy to achieve.

What the Numbers Said

By the third quarter of 2011, the macroeconomic picture was substantially better than it had been when Golding’s government had initiated the Jamaica Debt Exchange in January 2010 and signed the Stand-By Arrangement in February. The primary surplus had been maintained through multiple quarters. The domestic debt burden had been restructured in a way that made the interest payments manageable, if still enormous. Interest rates were falling. Credit conditions were gradually easing. And the IMF, which had reviewed Jamaica’s performance quarterly since early 2010, had found sufficient grounds at each juncture to continue disbursing.

Tourism was performing well across the third quarter. Stopover arrivals were continuing their recovery, with the United States market showing particular strength. Remittances were holding above US$2 billion annually, providing a substantial and steady stream of foreign exchange that supplemented tourism earnings and helped stabilise the external accounts. The current account deficit, which had been 9.2 per cent of GDP in 2009, had narrowed to manageable levels.

The Programme’s Unfinished Business

What Golding left unfinished was considerable. The debt-to-GDP ratio remained above 140 per cent — one of the highest in the world relative to the size of the economy. The SBA, approved for 27 months in February 2010, was approaching its scheduled end in May 2012; and while the Finance Minister had been authorised in the 2011-12 budget to negotiate an extension, no successor programme had yet been agreed. The structural reforms that Vision 2030 Jamaica demanded — improvements in the investment climate, energy sector modernisation, crime reduction, skills development — remained largely aspirational. And the public sector wage question, which had produced healthcare strikes and teacher disputes across the year, was still unresolved.

The Golding government had achieved something that had eluded previous Jamaican administrations: it had completed multiple consecutive IMF programme reviews without a breakdown. The Jamaica Debt Exchange had demonstrated that domestic creditors could be persuaded to accept significant haircuts in exchange for systemic stability. These were genuine institutional and fiscal achievements. But they were achievements of stabilisation, not of growth — and the gap between the two remained vast.

What This Means

A change of prime minister in the middle of an IMF programme is always a risk event. The programme’s continuity depends not just on the institutional commitments made by the government as a whole, but on the political will of specific leaders who must defend deeply unpopular choices — wage freezes, spending cuts, tax collection — against a public that is tired of adjustment and an opposition that is, by definition, motivated to highlight the adjustment’s costs. Andrew Holness, who emerged as the leading candidate to succeed Golding within the Jamaica Labour Party, would inherit both the programme and its political vulnerabilities.

The broader question — whether the fiscal architecture that Golding’s government had constructed could survive the political transition that his departure made necessary — was one that markets, creditors, and ordinary Jamaicans were watching with genuine uncertainty as the third quarter of 2011 drew to a close.

Outlook

As the JLP prepared to select a new leader and Jamaica prepared, in all probability, for an early general election, the economic programme that had consumed so much of the country’s political energy since 2009 was entering its most uncertain phase. The macroeconomic indicators were, on balance, positive. But the institutional and political conditions for sustaining the adjustment — a government with a mandate, a clear successor programme to the SBA, a resolution of the wage question, and a strategy for converting stabilisation into the growth that Vision 2030 Jamaica required — were all, as of September 2011, unresolved. The quarter had produced Jamaica’s most significant political transition in four years. The economic consequences of that transition were still to be determined.

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