U.S. Response to Jamaica's Economic Crisis

Gao ID: ID-80-40 July 17, 1980

Assistance from the Agency for International Development (AID) to Jamaica increased sharply in 1977 with balance-of-payment support and developmental aid of nearly $30 million. This increase reflected the U.S. interest in the Caribbean and a concern for the economic deterioration of a neighboring nation. Despite the efforts of the United States, Jamaica, and other donors to halt the decline, the economic situation remains critical with little hope of immediate recovery. Jamaica's balance-of-payment position has suffered as a result of the rise in oil prices, a decline in tourism, a high level of commodity consumption, an undiversified export economy, and a capital outflow partly due to the government of Jamaica policies. Negotiations between the Government of Jamaica and the International Monetary Fund were unsuccessful in reducing the Government's budget to promote economic stabilization and recovery. Compounding matters, sufficient alternative funding sources have not been identified. Nearly all of the AID projects in Jamaica have problems, which include inadequate project planning, poor commodity procurement, inability of the implementing agency to manage the project, or differences between AID and the Government of Jamaica concerning project goals and interest.

The problems that are most worrisome are those related to Jamaica's failing economy. AID projects must operate in a climate where local commodities are often in short supply, there are not enough managers and other skilled people, basic infrastructure is deteriorating, inflation is high,and the host government's budget is strained. AID and Jamaican officials are generally confident that the government will be able to continue each project once AID support project ends. However, given the economic conditions that exist in Jamaica which have threatened Jamaica's ability to absorb additional project assistance, project expansion may be difficult. If the Jamaican economy stabilizes or improves, the AID projects have a reasonable chance of success. If the economy deteriorates further, the projects will surely suffer. Since 1978, AID has also committed $21 million to Jamaica through the multilateral Caribbean Development Facility (CDF). The annual evaluation of AID to CDF generally does not comment on the ability of the participating country to meet specified targets. AID relies on other sources to assure project progress and compliance without performing its own independent evaluation and project site visits to verify and supplement information obtained from prime donors. In addition, the AID staff does not directly nor routinely receive project progress reports or spot check to assure proper use of funds.


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