Jamaica: June 11, 2009

June 11, 2009
Jamaica
Primary Credit Analyst:
Olga Kalinina, CFA, New York (1) 212-438-7350; olga_kalinina@standardandpoors.com
Secondary Credit Analyst:
Roberto Sifon Arevalo, New York (1) 212-438-7358; roberto_sifon-arevalo@standardandpoors.com
Table Of Contents
Major Rating Factors

Rationale
Outlook
Comparative Analysis: Stronger Institutions And Stronger Political Will
Compared With Peers
Political Environment: Emphasis Is On Working Toward A More
Comprehensive Partnership With Unions And The Private Sector
Economic Prospects: Jamaica Has Been Especially Hard Hit By The
Downturn In U.S. Economy
Fiscal Flexibility: Focus Is On Lowering The Deficit, Though We Expect
Progress This Year To Be Minimal
Monetary Policy: Despite The BoJ's Prompt Efforts To Manage Liquidity
Pressures, The Jamaican Dollar Will Likely Continue To Depreciate
External Finances: Current Account Deficit Will Shrink In 2009, But
External Liquidity Pressures Remain High
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Jamaica
Major Rating Factors
Strengths: Sovereign Credit Rating
• Developed local capital markets compared with those of its rated peers. B-/Negative/C
• History of an ongoing commitment to a strong credit culture amid difficult
economic conditions.
• Political stability.
Weaknesses:
• Fiscal inflexibility, largely reflecting high and increasing interest payments that consume more than half of
government revenues.
• Difficulty in reducing a large general government debt burden amid persisting fiscal pressures.
• Vulnerability stemming from the island's geographical location and size as well as the openness of its economic
structure.
Rationale
The economic situation in Jamaica deteriorated in 2008, and Standard & Poor's Ratings Services expects it to
worsen further in 2009. This deterioration will increasingly spill over into Jamaica's fiscal and external accounts, the
two weakest areas of the sovereign's credit profile. Jamaica's real GDP declined by 0.6% in 2008, reflecting the
impact from the external environment on major sectors such as tourism, bauxite, construction, and manufacturing
as well as continuous difficulties in the agricultural sector. We expect the slowdown to intensify in 2009, with a
projected economic contraction of 3.5% (see Table 1).
The economic deterioration has weakened fiscal performance, as revenues and grants fell below the budget by 10%
in fiscal 2008 (ended March 31, 2009). Overall, the central government deficit ended up at 8% of GDP in fiscal
2008 (according to Standard & Poor's methodology, which includes the central bank's quasi-fiscal losses but
excludes certain capital revenues) compared with the budgeted 5.4% (according to the same methodology).
Including the social security surpluses, the general government deficit was 7.6% of GDP in fiscal-year 2008, up from
5% a year ago. This fiscal deterioration is especially worrisome in light of the high government debt level, which we
estimate at 117% of GDP in fiscal 2008 (113% on a net basis), one of the highest levels among rated sovereigns.
Given the dim outlook for 2009, the fiscal picture will likely worsen despite the government's efforts to boost
revenue intake and contain spending. Standard & Poor's projects the general government deficit at 8% of GDP in
2009.
Lower revenues and rising interest rates (Treasury bill yields almost doubled in 2008) resulted in interest payments
consuming 48% of revenues in 2008. We expect that this ratio will increase further to 58% in 2009, as
exchange-rate pressures likely will preclude the easing of monetary policy. The Jamaican dollar depreciated against
the U.S. dollar by 25% in fiscal 2008, and the slippage will likely continue in 2009.
In 2009, multilateral disbursements will only partially alleviate external pressures stemming from high current
account deficits (12% of GDP expected for 2009, down from 19% of GDP in 2008), sharply lower foreign direct
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Jamaica
investments, and high amortization needs. Net international reserves have been declining since August 2008, and
they totaled US$1.7 billion as of May 2009 after stabilizing since March 2009. Overall, we project the external
financing gap (defined as current account payments plus short-term debt and medium- and long-term debt
amortization) at 125% of current account receipts plus usable reserves in 2009.
Outlook
The negative outlook reflects the likelihood of a downgrade if policy actions fail to contain the ongoing fiscal and
external deterioration. The global economic environment complicates policy flexibility, and the Jamaican authorities
are struggling with high interest rates, exchange-rate pressures, and fiscal deterioration in the midst of the economic
recession. In these challenging times, the policy options are few, and the risk that economic fundamentals will
weaken even further is high. As such, if the government's options for fiscal stabilization narrow or if the external
situation worsens, impairing domestic confidence and the value of the currency, we likely will lower the rating to the
'CCC' category. Conversely, if the government sufficiently tightens its fiscal belt, secures timely disbursements of
official financing, and is able to avoid further increases in the interest rates, we might revise the outlook to stable.
Table 1
Jamaica's Outlook
—Year ended Dec. 31 unless otherwise noted—
'B' median
2005 2006 2007 2008 2009f 2010f 2011f (2009f)
GDP per capita (US$)* 4,335 4,639 4,989 5,465 5,174 4,945 4,972 2,240
Real GDP (% change) 1.5 2.6 1.1 (0.6) (3.5) (1.0) 1.0 2.5
Real GDP per capita (% change) 1.1 2.2 0.7 (1.0) (3.9) (1.4) 0.6 0.6
General government balance/GDP (%)* (3.9) (6.0) (5.1) (7.6) (8.0) (7.3) (5.6) (3.0)
General government interest/revenue (%)* 53.7 51.2 44.5 48.2 58.0 51.8 47.2 4.4
Net general government debt/GDP (%)* 123.8 120.4 113.5 113.1 113.3 114.3 113.2 30.2
Domestic credit to private sector and nonfinancial 24.1 25.5 29.2 30.9 30.5 30.9 33.5 29.3
public-sector enterprises/GDP (%)
CPI (average % change) 12.6 5.7 16.8 20.0 15.0 10.0 7.0 6.5
Current account balance/GDP (%) (9.4) (9.6) (13.7) (19.3) (12.3) (10.2) (9.0) (9.1)
Gross financing needs/useable reserves plus current account 114.3 106.4 118.0 135.8 125.3 126.2 127.1 113.6
receipts (%)
Narrow net external debt/current account receipts (%) 68.7 73.1 88.2 99.7 120.1 119.7 114.7 47.9
*Fiscal year ended March 31. f—Forecast.
Comparative Analysis: Stronger Institutions And Stronger Political Will Compared

With Peers
Jamaica's key peers include Seychelles (SD/--/SD), Grenada (B-/Stable/C), Lebanon (B-/Stable/C), Belize (B/Stable/B),
and Fiji (B-/Negative/C). (All ratings are foreign-currency sovereign credit ratings as of June 10, 2009.) Except for
Lebanon, these countries have small economies that depend highly on tourism. In addition, they have high levels of
debt and limited fiscal flexibility. However, in sharp contrast with three of the five peers, Jamaica remains current
on its debt obligations despite a very high debt burden.
Jamaica
Part of this strong debt culture stems from solid institutions in Jamaica that underpin the rating. This is in contrast
with most countries in the 'B' category, including higher-rated peers, such as Belize, Suriname (B+/Stable/B), the
Dominican Republic (B/Stable/B), or any African country in the same rating category. Jamaica's
institutions—including the civil service, the judiciary, and the media—are stronger and play a more vital role than
do those in most 'B' category peers. However, Jamaica's crime rate remains a major problem. Although violence
remains isolated from tourist areas, the country has the world's third-highest crime rate.
The structure of the Jamaican economy is similar to that of other Caribbean economies in terms of openness,
dependence on tourism and commodity-based exports, and vulnerability to weather shocks. Jamaica's current
account receipts are an estimated 54% of GDP in 2009, similar to that of Belize and Grenada. However, Jamaica's
economic structure is more diversified than that of many smaller Caribbean sovereigns, and its export base is wider
and depends less on quota-based agricultural exports.
On the downside (in the context of the global crisis), the reliance on tourism (roughly 25% of current account
receipts) and remittances (30% of current account receipts) will affect growth in the next two years. In general,
Jamaica's growth has been lagging that of its peers, largely reflecting many structural impediments, such as a
crowding-out of the private sector in the context of the government's high borrowing requirements, labor-market
rigidities affecting productivity, high security costs, large informal economy, and external shocks. Jamaica's average
real GDP per capita growth of 0.7% between 2004 and 2008 was substantially lower than the 'B' median's 3.9%
over the same period (see Chart 1). The 2009-2010 growth performance should be in line with that of other
Caribbean countries suffering from the impact of the global crisis.
Chart 1

Jamaica
Jamaica's general government debt burden, at an estimated 117% of GDP on a gross basis at the end of fiscal 2009
(113% on a net basis), is one of the highest of all rated sovereigns and more than triple the 'B' median's 30% on a
net basis (see Chart 2). Importantly, the interest cost is rising, reaching 58% of revenues in 2009 from 48% in 2008
(see Chart 3). In addition, Jamaica is a negative standout among its counterparts because of the high sensitivity of its
debt to interest-rate movements, as more than 60% of its domestic debt is interest-rate sensitive.
Chart 2
Jamaica
Chart 3
The island's fiscal flexibility remains limited, reflecting high and rising interest payments, already high taxes (27% of
GDP), and significant capital-spending needs. A cumbersome tax system and poor tax enforcement have led to one
of the highest tax-evasion rates in the world. The government is addressing these issues aggressively. On a positive
note, well-developed local capital markets, which are deeper than those of most of Jamaica's 'B' rated counterparts,
support the financing of the Jamaica's fiscal deficits (estimated at 8% of GDP in 2009 on the general government
level, surpassed only by the fiscal deficits in Fiji; see Chart 4).

Jamaica
Chart 4
On the external front, Jamaica's current account deficit, at 12% of GDP in 2009, is higher than the 'B' median but
comparable with that of its commodity-importing peers (see Chart 5). Jamaica's external liquidity is generally weak
but comparable with that of the 'B' rated peers. Gross financing needs (defined as current account payments plus
short-term debt plus medium-term/long-term debt amortization) are estimated at 125% of useable reserves and
current account receipts in 2009, roughly in line with 114% for the 'B' median and comparable with the peers (see
Chart 6). Jamaica's narrow net external debt, at 120% of current account receipts in 2009, is more than double the
'B' median's 48% and above that of all peers except Seychelles (see Chart 7). However, given the large holding of
government external debt by the local financial institutions, this ratio might be overstated.
Jamaica
Chart 5

Jamaica
Chart 6
Jamaica
Chart 7
Political Environment: Emphasis Is On Working Toward A More Comprehensive

Partnership With Unions And The Private Sector
A comprehensive social partnership—involving the government, the opposing political party, the private sector, and
trade unions—remains key to Jamaica moving forward. The tripartite union (among the government, trade unions,
and the private sector) is still strong, though the labor unions increasingly request more substantive structural
reforms to equally share the burden of the belt tightening. Acknowledging the need to step up communication with
the private sector, a separate committee has been set up that includes the representatives of the Ministry of Finance
and the Private Sector Organization of Jamaica, a national organization of private-sector associations, companies,
and individuals that are working together to promote a competitive and productive Jamaican private sector.
The proactive policymaking remains a supporting factor for the ratings on Jamaica. On the monetary front, the
Bank of Jamaica (BoJ) swiftly introduced a number of measures to better manage demand for U.S. dollars,
reintroduced a surrender requirement, and tightened the monetary stance in December 2008. On the fiscal front, the
2009/2010 budget calls for fiscal tightening, including a wage freeze and a number of tax measures to keep deficits
under control. The long-awaited privatizations of sugar companies and Air Jamaica (which lost US$160 million in
2008) are incomplete. The privatization of Air Jamaica is highly unlikely in the short term. The divestment of five
state-owned sugar factories to a Brazilian investor, Infinity Bio-Energy Ltd., which was expected by year-end 2008,
has failed.

Jamaica
Tackling crime remains an important aspect of the government's economic and social program. Jamaica's murder
rate remains the highest in the Caribbean and the third-highest in the world. Although crime remains localized and
(so far) away from the tourist belt, the rising turf war, if not contained, will inevitably lead to the expansion of
criminal activities. To combat this, Jamaica has improved police enforcement, security guards, new equipment, and
anti-corruption practices within the police. As unemployment rises and remittances subside, there are indications of
higher crime incidents.
Economic Prospects: Jamaica Has Been Especially Hard Hit By The Downturn In
U.S. Economy
Jamaica was the only rated Caribbean country where an economy contracted already in 2008. Real GDP declined by
0.6% in 2008 (see Table 2) compared with growth of 1.1% in 2007. The main industries that contracted were
agriculture, forestry and fishing, manufacturing, construction and transport, storage, and communication. However,
the finance and insurance services, wholesale and retail, and hotels and restaurants sectors grew. The decline was
mostly a result of pass-through from the global slowdown, especially from the U.S. With estimated damage of 15
billion-18 billion Jamaican dollars (J$), Hurricane Gustav in August 2008 further worsened the situation.
Table 2
Jamaica's Economic And Monetary Indicators
—Year ended March 31 unless otherwise noted—
2005 2006 2007 2008 2009f 2010f 2011f

GDP per capita (US$) 4,335 4,639 4,989 5,465 5,174 4,945 4,972
Real GDP (% change)* 1.5 2.6 1.1 (0.6) (3.5) (1.0) 1.0
Real GDP per capita (% change)* 1.1 2.2 0.7 (1.0) (3.9) (1.4) 0.6
Domestic credit to private-sector and nonfinancial public-sector enterprises/GDP (%)* 24.1 25.5 29.2 30.9 30.5 30.9 33.5
Domestic credit to private-sector and nonfinancial public-sector enterprises (% change)* 18.6 19.9 29.7 26.0 10.0 10.5 17.1
Consumer prices (average % change)* 12.6 5.7 16.8 20.0 15.0 10.0 7.0
Memo Item: Nominal GDP (Bil. J$) 718 813 920 1,098 1,225 1,335 1,442
*Year ended Dec. 31. f—Forecast.
By sector, tourism started off strong in the first half of 2008 (a 10% increase in the first four months of 2008).
However, it slowed down in the second half of the year because of the economic meltdown, high oil prices, and
Hurricane Gustav, leading to an overall decline of 0.5% in 2008. Although the stop-over arrivals grew by 4%
(mainly propped by the arrival of nonresident Jamaicans), cruise ship arrivals declined by 7%. Tourism from the
U.S. grew registered 1.6% growth, the number of tourists from Europe contracted by 1.5%, and tourism from
Canada continued its robust growth with a 24% increase in arrivals, bringing the share of Canadian tourists to 13%
of the total from 8% during the past three years. Overall, visitor spending grew by 1.2% in 2008.
We expect that Jamaica's tourism industry will take a strong hit in 2009, declining by 10%. Heavy discounting will
mean that the tourism expenditures will have an even larger dip. Many tourism projects are on hold, reflecting the
financial difficulties of their Spanish investors. Some, however, are proceeding, such as 700-room Secrets and
Palmira condos, both in Montego Bay.
The bauxite industry is also suffering because of a sharp fall in alumina prices (aluminum prices almost halved from
their peak in mid-2008). Jamaica's largest bauxite and alumina producing company, Alumina Partners of Jamaica,
Jamaica
cut production by 50% and laid off staff. In addition, some mines have been closed.
The increase in the official unemployment has not been too severe so far. The unemployment rate was 12.7% in
2008 compared with 10.7% in 2007. In many sectors, the companies have been trying to reduce work weeks rather
than laying off staff. However, this will likely change as economic conditions get tougher. The sugar and bauxite
sectors have been drastically reducing their staff. Unemployment is expected to rise to 15% in 2009.
We expect that 2009 will be a tough year for Jamaica. Real GDP for the first quarter of the year contracted by 2.8%
relative to the corresponding period in 2008. Mining and quarrying was the main contributor to the downturn,
recording a 28% reduction, as the Windalco and Alpart alumina plants are temporarily closing.
Construction was down 7% during the first three months of the year, and manufacturing declined by 4%.
Agriculture was the only sector with positive growth, as it is recovering from the lingering effects of Hurricane
Dean. Overall, for full-year 2009, Standard & Poor's forecasts that real economic growth will fall by 3.5% in 2009,
reflecting the negative impact of the declining demand for exports (tourism, in particular), lower capital flows, and a
reduction in remittance flows. The recession is expected to continue into 2010, with the fall of real GDP of 1% in
2010 before recovering gradually to 1% growth in 2011 (see Chart 8).
Chart 8

Jamaica
Fiscal Flexibility: Focus Is On Lowering The Deficit, Though We Expect Progress

This Year To Be Minimal
The deficit for fiscal-year 2008 (ended March 31, 2009) has been below the official budget's target by 74% and
amounted to 6.9% of GDP (compared with a budgeted 3.9%). Revenue grew by 11% (but declined on a real basis)
compared with the targeted growth of 27%, as poor collection of the bauxite levy, capital revenue, and
import-related taxes took their toll. At the same time, the adjustment on the spending side has been uneven in fiscal
2008. According to our calculation—which includes the quasi-fiscal losses of the central bank (estimated at 1% of
GDP in 2008) and excludes certain capital revenues (1.7% of GDP)—the central government deficit was 8% of GDP
in fiscal 2008. On the general-government level (including the social security surpluses), the deficit was 7.6% of
GDP, up from 5.1% in 2007 (see Table 3).
Table 3
Jamaica's Fiscal Indicators
—Year ended March 31—
2005 2006 2007 2008 2009f 2010f 2011f

(as a % of nominal GDP)
General government revenue 26.4 26.4 27.0 25.2 24.3 25.3 26.9
General government expenditure 30.3 32.4 32.0 32.8 32.3 32.6 32.5
General government balance* (3.9) (6.0) (5.1) (7.6) (8.0) (7.3) (5.6)
Central government revenue 26.0 26.0 26.7 25.0 24.1 25.1 26.7
Central government expenditure 30.3 32.4 32.0 33.0 32.6 32.8 32.5
Central government balance¶ (4.3) (6.4) (5.4) (8.0) (8.5) (7.7) (5.8)
General government primary balance 10.3 7.5 6.9 4.1 5.6 5.4 6.9
Gross general government debt 126.3 125.3 118.2 117.5 117.4 118.2 117.2
Net general government debt 123.8 120.4 113.5 113.1 113.3 114.3 113.2
(as a % of general government revenue)

General government balance (14.8) (22.7) (18.8) (29.9) (32.9) (28.7) (20.8)
General government interest expense 53.7 51.2 44.5 48.2 58.0 51.8 47.2
General government debt 478.1 475.1 438.2 465.3 482.4 466.5 436.1
*Includes central government and social security balances. ¶Includes central bank losses and adjustments for one-off capital revenues. f—Forecast.
The government's 2009 budget aims to contain the deficit to 5.5% of GDP. The authorities plan to achieve this goal
through a number of measures, such as an increase in the taxes on fuel, a broadening of the general consumption tax
base, and a new phase of the tax amnesty program (to run through October 2009), which aims to address the more
than 200,000 Jamaicans who are not now declaring income taxes. On the spending side, the public-sector wage
freeze was announced in April 2009, effectively postponing the 7% increase agreed for fiscal-year 2009 as part of
the 2008-2010 Memorandum of Understanding between the government and the Confederation of Trade Unions.
Capital spending will also remain subdued. Despite a number of important fiscal measures, the quickly worsening
economic situation will likely prevent the improvement in the fiscal position, hence we conservatively project the
general government deficit to remain at about 8% of GDP in fiscal 2009 (see Chart 9).
Jamaica
Chart 9
We forecast Jamaica's borrowing requirement at 20% of GDP in fiscal 2009, with the financing traditionally reliant
on predominantly domestic sources and ongoing official disbursements, including sizeable assistance from the
multilateral institutions. In addition, the ongoing talk with the IMF signals a new attitude of the government toward
possible engagement with the fund.
The net general government debt is estimated to remain at more than 110% of GDP (where it was in the past two
years), as high inflation conceals the negative impact of sizeable fiscal deficits (see Chart 10). However, debt-service
pressures are rising. General government interest to revenues was 48% in 2008, and we expect it to surge to 58%
this fiscal year. The 90-day Treasury bill rates increased to 22% in April 2009 from 13% in April 2008. Similarly,
the BoJ 90-day open-market operations rate increased to 20% from 13.9% over the same period. The BoJ is
unlikely to ease its monetary policy despite declining inflation, so interest rates will remain high.

Jamaica
Chart 10
The improvement in the debt structure remains uneven. The interest-rate-sensitive debt accounts for more than 60%
of domestic debt. In addition, the share of external and foreign-currency-linked domestic debt remains at about 50%
of total debt, as it has for the past four years. By creditor, the central government's external debt (excluding BoJ
debt) remains skewed toward commercial creditors, which held almost 70% of Jamaica's external debt. Recognizing
the high and costly dependence on the external commercial creditors, the government is committed to improving
cooperation with the multilateral institutions. The banking system contingent liability is estimated at 15% of GDP.
Monetary Policy: Despite The BoJ's Prompt Efforts To Manage Liquidity

Pressures, The Jamaican Dollar Will Likely Continue To Depreciate
The Jamaican dollar declined by 25% in fiscal 2008 relative to 4.9% in fiscal 2007. The last quarter of
calendar-year 2008 and the first quarter of 2009 (when the Jamaican dollar slipped by 10.7% and 10.4%,
respectively) were the toughest. On the supply side, the slowdown in bauxite, tourism, and remittances receipts has
affected foreign exchange inflows. On the demand side, the increased demand for foreign currency emanated from
margin calls in October/November 2008, Christmas-season consumer spending in the fourth quarter of 2008, and
erratic demand for foreign currency by large companies in January 2009, partly because of the rising panic in the
foreign exchange market. To stabilize the situation, the BoJ was selling U.S. dollars in the market heavily in the last
quarter of 2008 and recently introduced a number of measures, such as a better management of foreign-currency
demand by large public corporation, moral suasion, and the increase of the surrender requirement for the
Jamaica
commercial banks and cambios by an additional 15% and 10%, respectively, of U.S. dollar purchases. The bank
also increased the statutory liquidity requirement of deposit-taking institutions to 28% in February 2009 from 23%
a year ago. This, together with the large inflow of multilateral funds in February, helped alleviate the pressures on
the foreign exchange rate. In fact, the pace of exchange rate depreciation slowed to 2.5% in February 2009, 0.6% in
March, and close to zero in April and May. Going forward, the authorities still view exchange rate depreciation
unfavorably, and they will likely revert to the interest rate increases, selling U.S. dollars, or both if pressures
re-emerge.
Interest rates increased sharply in the last half of 2008, as the BoJ was managing the liquidity in the market, which
was affected by both the slowing economy and high inflation. Although the inflation outlook has improved, foreign
exchange liquidity conditions remain tight, and we anticipate only a minimal reduction in the interest rates in 2009.
Inflation was 20% on average in 2008 but has subsided following the fall in commodity prices. Supply shocks from
adverse weather conditions and a depreciation in the exchange rate over the last two quarters of 2008 also affected
the CPI. We estimate inflation of 15% in 2009. Falling consumer demand, lower commodity prices, and a tight
monetary policy will temper inflation, but the pass-through from the exchange-rate depreciation (which is expected
at 18% in 2009) will offset these factors somewhat.
Maintaining high international reserves is important for the BoJ, given the bank's objective to ensure price and
exchange-rate stability. Reserves were US$1.7 billion in May 2009. The cost of keeping high reserves is significant
given steep and rising repurchase rates. These rates—coupled with the high level of open-market operations (J$133
billion in 2008, having increased by 16% during that year)—result in annual cash losses for the central bank that
amounted to 1% of GDP in 2008. As the foreign exchange inflows and, hence, sterilization will be much less in
2009, we expect the losses to fall this year.
Credit to the private sector and nonfinancial public-sector enterprises grew by 26% in 2008 and will slow to 10% in
2009. In the context of the lower credit demand expected in 2009, which reflects a falling domestic confidence and
high interest rates, the US$300 million of IADB funds approved under the liquidity facility, of which US$41 was
disbursed, might not be as instrumental in supporting the private-sector liquidity and growth as earlier expected.
The deposit base has remained steady, though there is evidence of depositors shifting to U.S. dollar instruments from
Jamaican dollars.
The banking sector remains liquid and well capitalized. Although nonperforming loans remain low (averaging 3% in
2008), deterioration in asset quality is likely, especially in the context of strong growth of consumer loans, especially
credit card receivables in 2008. In fact, the growth in credit card loans has been most pronounced after the collapse
of two major investment schemes in April-July 2008. The proliferation of the unregulated investment schemes in
Jamaica in the last few years has ended sadly (as expected) for the remaining investors, as the companies have been
put into receivership.
External Finances: Current Account Deficit Will Shrink In 2009, But External
Liquidity Pressures Remain High
The current account deficit was 19% of GDP in 2008 (see Table 4), mostly because of high oil and food prices in the
first half of the year. Tourism spending grew by 1.2% in 2008. Remittances increased by 3.4% for the full year,
though the slowdown was evident at the end of the year (a 13% month-over-month decline in December 2008). A

Jamaica
substantial foreign direct investment related to the sale of Lesalles de Mercado to the Trinidadian Angostura
financed the 2008 deficit. Despite substantial inflows, international reserves declined to US$1.77 billion in 2008
from US$1.88 billion in 2007, as the central bank was intervening in the foreign exchange market and providing
liquidity support for the financial institutions facing margin calls (US$300 million facility, of which US$170 million
have been drawn down in October/November 2008). As the foreign currency inflows (tourism, remittances, and
investment) slowed down in 2009, the loss in the reserves has been continuing—to US$1.67 billion in May 2009,
down from US$1.76 billion in January 2009. The last drop reflected the repayment of a €200 million Eurobond in
February 2009, which was only partly counterbalanced by the inflow of official and commercial funds since
December 2008.
Table 4
Jamaica's External Indicators
—Year ended Dec. 31—
2005 2006 2007 2008 2009f 2010f 2011f

(as a % of nominal GDP)
Current account receipts 54.5 58.9 58.2 54.6 54.2 60.1 64.0
Trade balance (22.5) (23.9) (25.9) (29.0) (20.8) (21.6) (23.8)
Current account balance (9.4) (9.6) (13.7) (19.3) (12.3) (10.2) (9.0)
Net FDI 5.1 6.5 4.8 10.0 2.7 4.5 6.7
(as a % of current account receipts, unless noted otherwise)

Current account balance (17.2) (16.3) (23.6) (35.3) (22.7) (16.9) (14.0)
Total external debt 120.2 122.7 130.2 136.9 152.6 150.8 149.5
Narrow net external debt 68.7 73.1 88.2 99.7 120.1 119.7 114.7
Net public-sector external debt 51.5 51.1 61.0 67.2 78.9 77.3 71.8
Net banking-sector external debt (1.5) (0.8) (1.9) 2.5 6.6 7.5 7.0
Reserves/current account payments (months) 3.0 3.1 2.9 2.1 2.3 1.9 1.8
Gross financing needs/current account receipts plus reserves (%) 114.3 106.4 118.0 135.8 125.3 126.2 127.1
Memo: Current account receipts (Mil. US$) 6,257 7,265 7,748 8,000 7,537 8,022 8,630
f—Forecast.
Multilateral inflows from December 2008 included:
• US$100 million from the World Bank (disbursed).

• US$300 million liquidity facility from the IADB (of which $41 million was disbursed).
• US$100 million from the IADB (disbursed).
• US$100 million from China (approved).
• US$100 million from Scotiabank (disbursed).
• US$100 million policy-based loan from the Caribbean Development Bank (US$33 million disbursed).
We forecast that the external current account will narrow to 12% of GDP in 2009, based on lower commodity
prices and subdued consumer demand (see Chart 11). However, the lower tourism and remittances inflow will limit
the magnitude of current account deficit improvement. Remittances fell by 10% in the first quarter of 2009. The
foreign direct investment outlook is dim, especially compared with 2008, which was a good year. On the positive
side, the public external amortization in 2009 is lower than last year, and the multilateral creditors will likely
Jamaica
provide important relief. The banks manage to roll over their international credit lines, albeit at a higher cost. Large
players in the nonfinancial private sector (for instance, Digicel) have been also successful in tapping the international
market.
Chart 11
Overall, the liquidity ratio remains weak at 125% of useable reserves in 2009 (see Chart 12). Narrow net external
debt is projected at 120% of current account receipts in 2009, a significant increase from 100% last year, which
mostly reflects the dwindling current account receipts.

Jamaica
Chart 12
Ratings Detail (As Of June 11, 2009)*

Jamaica
Sovereign Credit Rating B-/Negative/C
Senior Unsecured (35 Issues) B-
Sovereign Credit Ratings History
18-Mar-2009 B-/Negative/C
21-Oct-2008 B/Negative/B
10-Dec-2004 B/Stable/B
Default History
Restructured between US$63 million and US$377 million in commercial bank debt in 1978-1979, 1981-1985, and 1987-1993.
Population 2.7 million (2009)
Per Capita GDP US$5,174 (2009)
Current Government
Prime Minister Bruce Golding heads the ruling Jamaica Labour Party (JLP).
Election Schedule
Parliamentary
Last: September 2007
Next: By September 2012
*Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard
& Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country.
Jamaica

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June 11, 2009

Major Rating Factors

Standard & Poor’s RatingsDirect | June 11, 2009 2

Comparative Analysis: Stronger Institutions And Stronger Political Will Compared

Standard & Poor’s RatingsDirect | June 11, 2009 4

Standard & Poor’s RatingsDirect | June 11, 2009 6

Standard & Poor’s RatingsDirect | June 11, 2009 8

Political Environment: Emphasis Is On Working Toward A More Comprehensive

Standard & Poor’s RatingsDirect | June 11, 2009 10

2005 2006 2007 2008 2009f 2010f 2011f

Standard & Poor’s RatingsDirect | June 11, 2009 12

Fiscal Flexibility: Focus Is On Lowering The Deficit, Though We Expect Progress

2005 2006 2007 2008 2009f 2010f 2011f

(as a % of general government revenue)

Standard & Poor’s RatingsDirect | June 11, 2009 14

Monetary Policy: Despite The BoJ's Prompt Efforts To Manage Liquidity

Standard & Poor’s RatingsDirect | June 11, 2009 16

2005 2006 2007 2008 2009f 2010f 2011f

(as a % of current account receipts, unless noted otherwise)

Multilateral inflows from December 2008 included:

• US$100 million from the World Bank (disbursed).

Standard & Poor’s RatingsDirect | June 11, 2009 18

Ratings Detail (As Of June 11, 2009)*

Standard & Poor’s RatingsDirect | June 11, 2009 20

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