The Landslide and What It Inherited: PNP’s 42-21 Victory and the IMF Programme Awaiting Portia Simpson-Miller

Jamaica’s snap election on 29 December 2011 produced a result that surprised even the winners. The People’s National Party won 42 seats to the Jamaica Labour Party’s 21 — a crushing landslide that ended four years of JLP governance and brought Portia Simpson-Miller back to the highest office in the land. What she inherited was formidable: a debt-to-GDP ratio above 140 per cent, an IMF programme scheduled to expire in May 2012, two years of fiscal adjustment still incomplete, and an economy that was growing for the first time since the crisis but had not yet grown fast enough to make the adjustment feel worthwhile.

• PNP wins 42-21 landslide on 29 December, ending four JLP years
• Portia Simpson-Miller sworn in as PM on 5 January 2012
• New government inherits debt above 140 percent of GDP
• IMF Stand-By Arrangement expires May 2012 with no successor agreed
• Economy grew 1.4 percent in 2011, first positive year since crisis
• Andrew Holness, age 38, youngest-ever Jamaican PM, loses after 67 days

Andrew Holness had been prime minister for 67 days. He had inherited the office on 23 October 2011, when Bruce Golding stepped aside following the Dudus affair that had destroyed his predecessor’s political credibility. Holness, at 38 years old, was Jamaica’s youngest prime minister, and his brief tenure was defined from the start by the question of timing: when to call an election, and whether to call it before or after what promised to be a difficult set of budget negotiations with the International Monetary Fund.

He chose before. The election was called for 29 December, and the result — a 42-21 seat majority for Portia Simpson-Miller’s People’s National Party, with voter turnout falling to 53.17 per cent — was described by the PNP’s own leadership as exceeding their most optimistic scenarios. It was a verdict on four years of JLP governance: on the Dudus affair, on the social costs of austerity, on the wage freezes and healthcare strikes, and on the government’s handling of an economy that was growing, but not in ways that most Jamaicans had felt in their household incomes.

What the New Government Inherited

The economic inheritance was substantial in its complexity. The Jamaica Debt Exchange of 2010 had restructured the domestic debt burden and reduced interest payments significantly, buying the government fiscal space that had not existed before. But the overall debt-to-GDP ratio remained above 140 per cent in 2011, one of the highest in the world for an economy of Jamaica’s size and structure. The primary surplus was being maintained, but at a cost — to public services, to public sector wages, to capital investment — that had been politically corrosive and was not indefinitely sustainable.

The IMF Stand-By Arrangement, signed in February 2010, was scheduled to expire in May 2012. The Finance Minister of the outgoing government had been authorised to negotiate a successor programme, but no agreement had been reached before the election was called. The incoming Simpson-Miller administration would therefore need, as one of its first and most consequential acts, to decide what kind of IMF relationship Jamaica would have next: whether to negotiate a new programme, on what terms, and with what political mandate. It was a decision with implications for every aspect of the country’s fiscal path for the next several years.

The Economy in the Election Quarter

Against the political drama, the underlying economy was continuing to perform modestly well. GDP growth for the full year 2011 came in at approximately 1.4 per cent — the first positive year since the global financial crisis, and a meaningful marker of the stabilisation that the previous four years of difficult adjustment had made possible. Inflation had fallen sharply from 12.6 per cent in 2010 to 7.5 per cent in 2011 — a tangible easing of cost-of-living pressures that had, perhaps counterintuitively, materialised during the final phase of the JLP’s tenure. Interest rates were falling. The exchange rate was stable.

Tourism was performing strongly across the fourth quarter, with the traditionally busy winter season supporting arrival numbers that continued the recovery trend of the previous two years. Remittances held above US$2 billion for the year — a figure that, as it had in 2010, exceeded net tourism earnings and underscored the central role of Jamaica’s diaspora in sustaining the external account stability that the IMF programme required.

The Political Economy of the Transition

In terms of political economy, the December 2011 election was significant beyond the change of government it produced. It suggested that the Jamaican electorate had not rewarded fiscal discipline for its own sake — that delivering a primary surplus, passing quarterly IMF reviews, and restructuring the debt were necessary conditions for economic credibility, but insufficient conditions for political support. What voters appeared to want, beyond the spreadsheet, was a government that they believed understood the human cost of adjustment and would work to reduce it.

Portia Simpson-Miller, who had led the PNP through the opposition years and who had served as prime minister briefly in 2006-07, entered office with a different political style and a different rhetorical register from the technocratic Golding. Her challenge was to manage a transition from one IMF relationship to another while sustaining the fiscal discipline that the country’s creditors, bond markets, and external accounts required — and to do so in a way that felt more humane, more connected to the lived experience of ordinary Jamaicans, than the adjustment of the previous four years had managed.

What This Means

The election of December 2011 was, in economic terms, a transition risk — a moment when the institutional commitments built up over two years of IMF reviews were subject to renegotiation by a new administration with a different political base and different policy instincts. Markets and creditors would be watching the new government’s first moves on the IMF relationship, on the wage question, and on the budget, to assess whether the fiscal discipline of the Golding years was being continued or revised.

The outcome would shape Jamaica’s economic trajectory in ways that were difficult to predict. A clean transition to a successor programme — preserving the primary surplus targets, the debt reduction path, and the structural reform agenda — would build on the foundation that had been painfully constructed since 2009. A departure from that path, motivated by electoral promises of wage increases and social spending, risked reversing gains that had cost Jamaicans considerably to achieve. The immediate test of the new government’s intentions would come quickly: the IMF SBA expired in May 2012, and Jamaica could not afford to be without a successor framework for long.

Outlook

As 2011 closed, Jamaica stood at a genuine inflection point. The economy was growing for the first time in three years. Fiscal credibility, painstakingly rebuilt through two years of painful adjustment, was intact. But the debt burden remained crushingly high, the structural reforms required for durable growth were largely unfinished, and a new government was about to take power without a clear successor programme to the IMF arrangement that had anchored the country’s fiscal policy since 2010. Whether the gains of stabilisation would be preserved and built upon, or subjected to the pressures of a new political cycle, was the question that would define Jamaica’s economic story in 2012 — and, in all likelihood, for years beyond.

The goals set out in Vision 2030 Jamaica remained what they had always been: a developed-country standard of living, a competitive economy, a just and equitable society. The path to those goals ran through the decisions that the incoming administration was about to make.

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