The Second Exchange: How Jamaica Restructured Its Debt Again — and Built the Partnership That Might Make It Last

In February 2013, Jamaica did something it had already done once before and hoped never to do again: it asked its domestic creditors to accept less than they had been promised. The National Debt Exchange, executed three years after the Jamaica Debt Exchange that had launched the first IMF programme, replaced government bonds with new instruments on lower rates and longer maturities. This time, alongside the financial restructuring, the government signed a social compact that was meant to give the adjustment programme the political legitimacy its predecessor had lacked.

• National Debt Exchange executed in February 2013 restructuring domestic government bonds
• Partnership for Jamaica Agreement signed February 8 with unions and private sector
• EPOC created as independent civil-society body to oversee programme compliance
• IMF Extended Fund Facility negotiations move into final technical phase
• Tax reform package announced to broaden revenue base and reduce evasion
• GDP stabilises after two years of contraction as confidence begins to improve

The National Debt Exchange of February 2013 was, in its financial mechanics, the heir to the Jamaica Debt Exchange of 2010. Both involved the voluntary replacement of existing government domestic bonds with new instruments on less onerous terms — in the NDX’s case, with longer maturities and reduced interest rates that would lower the government’s annual debt service costs. Both were, in the careful language of the institutions that supervised them, voluntary. And both were, in the frank language of anyone who understood Jamaica’s fiscal position, a negotiated reduction in what the country’s creditors had expected to receive.

What was different about the NDX was the context in which it occurred. The 2010 JDX had launched a programme that subsequently went off-track, breaking down within a year over a back-wages dispute. The 2013 NDX was preceded, on February 8, by the signing of the Partnership for Jamaica Agreement — a formal compact between the government, the Jamaica Confederation of Trade Unions, the Jamaica Labour Party (in its role as loyal opposition), and the private sector, committing all signatories to support the programme’s goals and to share in the adjustment it would require. IMF staff noted that the Partnership was an innovation in Jamaica’s approach to fiscal adjustment — an attempt to build a broader political base for a programme that previous governments had been unable to sustain.

Alongside the Partnership, the government announced the creation of the Economic Programme Oversight Committee, known as EPOC. Chaired by a respected private-sector figure, EPOC was given a mandate to independently monitor the government’s compliance with the EFF targets and report publicly on its findings. The logic was straightforward: if the public could see, in real time, whether the government was meeting its commitments, the political cost of deviating from them would be higher. EPOC would become, in the years that followed, one of the more unusual features of Jamaica’s institutional landscape — a genuinely independent watchdog with no coercive powers but significant moral authority.

The tax reform package announced alongside the EFF preparations was equally significant. Jamaica’s tax system had long been characterised by a narrow base, high rates, numerous exemptions, and significant evasion — a combination that generated revenues well below what the economy’s size should have supported. The reform proposed consolidating multiple rates into a more uniform structure, reducing exemptions, and strengthening the Tax Administration Jamaica’s capacity to collect what was legally owed. The revenue implications were material: if the tax reform worked as designed, it would reduce the fiscal adjustment burden that would otherwise fall on spending cuts alone.

By the end of the first quarter of 2013, Jamaica’s economy was showing the first tentative signs that the long contraction might be nearing its end. GDP growth for the year would eventually be recorded at approximately zero point two per cent — barely positive, but positive nonetheless. Construction, which had been depressed for years, was beginning to show modest activity in some segments. Remittances remained resilient. Tourism continued to grow. And crucially, business sentiment — as measured by surveys conducted by the Private Sector Organisation of Jamaica and others — was improving, in anticipation of the credibility that an IMF programme would restore.

What This Means

The first quarter of 2013 was, in retrospect, one of the most consequential quarters in Jamaica’s modern economic history. The NDX restructured the debt that was choking fiscal policy. The Partnership for Jamaica Agreement created a social compact that had no precedent. EPOC provided accountability that previous programmes had lacked. And the tax reform, if it was implemented, would address a revenue weakness that had contributed to every fiscal crisis Jamaica had experienced since independence.

None of these measures guaranteed success. Jamaica had restructured debt before and failed to sustain the programmes that followed. Social compacts were easier to sign than to honour across multiple years and multiple governments. And tax reform, in Jamaica as elsewhere, faced organised resistance from those who benefited from the exemptions being eliminated. What distinguished 2013 from previous episodes was not certainty but architecture — the number of interlocking institutions and commitments that had been put in place to hold the programme together when the inevitable pressures arrived.

The Road Ahead

With the NDX complete, the Partnership signed, and EPOC established, the final piece of the architecture was the IMF board approval that would officially launch the EFF. That approval came in May 2013 — just beyond the end of the first quarter — and it released not only the IMF’s own resources but the World Bank, IDB, and EU disbursements that had been frozen since 2011. For a government that had been managing the national accounts without multilateral support for over two years, the arrival of those resources would represent both a financial and a psychological turning point. The hard part, as everyone involved understood, was what came next: four years of primary surpluses that Jamaica had never before sustained.

Follow Jamaica Homes on Youtube @jamaicahomes and Instagram @jamaica_homes and on Facebook @jamaicahomes Send us a message or email us at onlinefeedback@jamaica-homes.com or editor@jamaica-homes.com