Jamaica’s minister of finance Peter Phillips is working with the International Monetary Fund to implement reforms and stimulate economic growth in the Caribbean country.

Celebrations of Jamaica's 50th anniversary of independence from British rule in 2012 were nothing short of grand. Jamaica 50 Secretariat, an entity created especially for the occasion, launched over 40 events across the country, ranging from galas for more than 20,000 participants to street dance festivals.

Yet, Dr Peter Phillips, who that year assumed his role as deputy prime minister and minister of finance, planning and the public service, was not in the mood to celebrate. The country’s ratio of debt to gross domestic product (GDP) was at 140%, its net international reserves in 2013 were half of what they were at the end of 2011 and the country’s GDP growth in the past three decades has been among the slowest of all developing nations.

Mr Phillips is a seasoned politician who for more than two decades has served as minister in a number of departments, including national security, transport and works, and health. His current role is the most high-profile and without doubt the most difficult too.

Global isolation

“We were isolated from global capital markets, because the Stand-By Arrangement [with the International Monetary Fund, IMF] that had been negotiated by the previous administration had gone awry,” recalls Mr Phillips. “We were on the edge of a fiscal cliff. The situation was dire.”

Negotiations with the IMF, under Mr Phillips, were long and tedious, requiring a lot of back and forth to pinpoint exactly where the Jamaican government should implement new fiscal tightening measures. “At one point people said let’s sign up to the [arrangement] and let’s get it on the way. But then you have to be aware that when you move from the edge, sentiments can change,” says Mr Phillips.

The prolonged negotiations brought a wave of criticism against the newly appointed minister of finance, but finally the four-year Extended Fund Facility agreement was reached in May 2013. Under the agreement, the IMF will grant Jamaica a $2bn funding package to support reforms aimed at stabilising the country's economy and decreasing the country's debt ratio to below 100% of GDP by 2020.

Although content to see the agreement finally signed, people are still getting used to the new measures, such as a wage freeze for public-sector employees. “Now we are in the phase when a lot of people are saying ‘wow, this is extraordinarily hard’, but I think when the benefits become apparent, public opinion will quickly change,” says Mr Phillips.

Some benefits are visible already – the country's economy expanded in 2013 by 1.3% compared with 0.7% a year earlier and according to Mr Phillips has attracted more than $1bn in foreign direct investment on the back of the agreement.

Doing business

Thanks to the reforms – especially those related to starting a business, obtaining credit and getting electricity supply – Jamaica has jumped 27 positions in the World Bank's most recent Doing Business ranking. Currently in 58th place, it is the highest ranked country in the Caribbean. Yet, Mr Phillips is still not celebrating. The Doing Business report, although noting the country's progress in overhauling its business climate, also highlighted its shortcomings, especially in regards to Jamaica's tax regime. Although the country has improved its position by five places in terms of ease of paying taxes, it still ranks at a low 147th position with the time needed to file taxes estimated to be twice that of Organisation for Economic Co-operation and Development countries.

Cutting red tape in tax-related issues is still, according to Mr Phillips, a “work in progress”. And so is ensuring that the country's economic overhaul will translate into new jobs and higher salaries. The issue is especially pressing, given that the country’s poverty rate jumped from less than 10% in 2007 to more than 17% in 2010, according to World Bank data.

“The heavy lifting, such as securing the wage freeze and the exchange rate adjustments, has been done. We are off to a good start, but the race is far from over. What we have to really focus on now is how do we achieve greater levels of growth and get more better paying and sustainable jobs,” says Mr Phillips.

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