ASHLEY NYIKO MABASA: Lessons from Jamaica: dealing with SA’s debt crisis by following the IMF playbook

SA’s debt servicing has become the largest expenditure item in the national budget, prompting finance minister Enoch Godongwana to warn that failure to address the growing debt burden could push the country into a fiscal crisis.

With a debt-to-GDP ratio of 75.1%, SA’s situation may not yet be as severe as that of France or the US, both of which exceed 100%. However, the trajectory is concerning. SA’s debt surged from R627bn (23.6% of GDP) in 2008-09 to R5.26-trillion (74.1% of GDP) now, leading to an unsustainable debt service cost of 21.6% of revenue. 

This debt crisis coincides with slow economic growth, both in the aftermath of the 2008 financial crisis and the Covid-19 pandemic. Despite increasing consolidated government spending by 8%, SA has relied on borrowing to finance its obligations. As a result, public debt as a percentage of GDP has risen 18.5% above the median for emerging markets since 2023. 

Earlier this year the IMF expressed concern over SA’s debt-to-GDP ratio, highlighting socioeconomic challenges such as declining real per-capita income, persistent unemployment, pervasive poverty and extreme income inequality. These issues reflect deep-seated structural weaknesses, as revealed by a negative total factor productivity contribution to growth over the past 15 years. 

Jamaica provides a compelling example of how a country can successfully navigate a debt crisis. In 2010 Jamaica’s debt-to-GDP ratio stood at a staggering 140%, an unsustainable level for a small, developing economy. At that point Jamaica had repeatedly failed to meet IMF programme requirements, eroding trust between the country and international lenders. The IMF and World Bank had grown weary of Jamaica’s financial instability and there was real concern that the economy would be allowed to collapse. 

However, when a new government took office in 2012 Jamaica sought assistance from the US to bring back the IMF and World Bank. This happened at a time when the IMF was focused on bailing out European economies such as Greece and Spain. Politically, it would have been unpopular for the IMF to ignore Jamaica while assisting wealthier nations and Jamaica capitalised on this opportunity. 

Fiscal discipline

Past IMF interventions had failed, with much of the borrowed money being used to service existing debt rather than for productive investment. To break this cycle, the IMF introduced the Jamaica Debt Exchange programme, which played a pivotal role in resolving the crisis. Many expected Jamaica to fail but the country proved its critics wrong by implementing a well-structured fiscal plan. 

Key to Jamaica’s recovery was the adoption of fiscal rules that tackled the debt problem head-on, encouraged medium-term planning and limited fiscal slippage. The Fiscal Responsibility Framework, introduced in 2010, required the finance minister to implement measures reducing the fiscal deficit to zero by 2016, bringing the debt-to-GDP ratio to 100% and public sector wages to 9% of GDP. This was approved by Jamaican parliament in 2010. This framework was strengthened in 2014, setting a target to reduce the debt-to-GDP ratio to 60% by 2026, with an escape clause in the event of large economic shocks. 

Jamaica’s commitment to fiscal discipline should serve as a lesson for SA. With a debt-to-GDP ratio of 75.1%, SA must implement a robust fiscal responsibility framework to achieve fiscal consolidation and transform the economy. The best way to overcome a debt crisis is through economic growth rather than stifling it — unlike the National Treasury’s approach of increasing VAT by one percentage point over a two-year span, which only worsens the situation.

Another lesson from Jamaica is the role of political consensus. When Jamaica elected new leadership the government leveraged the country’s tradition of consensus-building through social dialogue. In 2013, discussions within the National Partnership Council, which included the government, opposition parties and social partners, resulted in the Partnership for Jamaica agreement, which established a shared understanding that fiscal reform was necessary and ensured that the burden of adjustment would be fairly distributed. 

SA’s political leaders must recognise that imposing a VAT increase of any size will not restore fiscal stability but will further alienate citizens. Instead, a national dialogue on debt reduction and economic reform is essential, especially within the government of national unity (GNU). 

Budget surplus

Jamaica successfully managed its financial system by maintaining a high primary budget surplus — 7% of GDP for seven years. This strategy, while economically painful, reduced the debt burden. SA, by contrast, has resisted such measures, preferring to rely on inflation and economic growth to lower the debt-to-GDP ratio. However, Jamaica’s experience demonstrates that traditional fiscal discipline can be effective, albeit politically challenging. 

A commitment to reducing debt often requires limiting spending on infrastructure, health and education, areas that are already under pressure in SA. Yet without strong fiscal discipline the country risks further economic instability.

For SA to reduce its debt burden it must embrace fiscal discipline and demonstrate the political will to implement a credible fiscal responsibility framework. While government has initiated reforms, it has yet to establish a national dialogue akin to Jamaica’s. Resolving the debt crisis requires a collective effort from all societal stakeholders, including government, opposition parties, business leaders and civil society. 

Ultimately, Jamaica’s experience highlights that debt reduction is not merely a technical process but a political and social challenge that demands national consensus. SA must take note if it hopes to avert a looming fiscal crisis. While advancing reforms to cut business regulation, improve governance and address labour market inefficiencies — areas where the IMF’s 2025 SA report estimates action could raise medium-term output by 9% — the country must also focus on boosting employment.

Higher employment and economic growth are crucial, not only for reducing poverty but also for ensuring the benefits of growth are widely shared. 

• Mabasa, an executive manager in the office of the deputy mineral & petroleum resources minister, is co-chair of the Brics Youth Council.