Int'l community couldn't care less about Caribbean debt crisis

Sunday, October 09, 2011

THE best kept secret in the Caribbean is that the region is sinking in a sea of debt. The debt crisis of these small, middle-income countries has been largely ignored by the international community and by the multilateral financial institutions such as the World Bank and the International Monetary Fund (IMF)

The debt/GDP ratio is 180 per cent in St Kitts, 120 per cent in Antigua, Grenada and Jamaica, 100 per cent in Barbados and Dominica, and 80 per cent in Belize, St Lucia and St Vincent. Guyana is not a middle-income country so it benefited from Heavily Indebted Poor Countries (HIPC) debt relief which reduced the debt/GDP ratio from 140 per cent in 2000 to 70 per cent in 2009.

The burden of debt repayment is a major drain on government revenue. The debt service to government revenue ratio is well in excess of the international benchmark of prudence. The ratio is 50 per cent in Antigua and Jamaica and 25 per cent in Dominica, St Kitts and St Vincent.

These countries are given little or no attention because they are strategically unimportant to the developed countries, economically insignificant to the international financial markets, and their middle-income status disqualifies them for debt relief schemes granted to poor developing countries.

The lack of visibility of the debt crisis of the small countries of the Caribbean is in stark contrast to the panic over Greece's imminent default. Greece is important because, while relatively small, its financial collapse could ignite a collapse among European banks and fatally injure the Euro.

The treatment of the debt problem of the Caribbean countries is manageable for the international community because the amounts involved are minute in global terms and the number of cases is relatively few.

The international community is not obliged to help these middle-income countries whose debts have been steadily accumulated by profligate government expenditure and the incontinence of their system of taxation. However, assisting Caribbean countries is not entirely unimportant to the international community because economic implosion in the Caribbean would produce more drug trafficking, transnational crime, illegal migrants, money laundering and foreign policy alliance with dubious regimes.

In the midst of the protracted global economic crisis it is difficult for the Caribbean countries to extricate themselves from their debt crisis through economic growth. The economic growth prospects of Caribbean economies are not encouraging, given high oil prices, reduced tourism earnings, the paucity of foreign investment and lower remittances. Caribbean governments have little fiscal space because of a weakened tax base and high levels of debt service to employ fiscal stimulus packages.

The debt problem of small, middle-income developing countries has been studied by the Commonwealth Secretariat and the World Bank and was ventilated by Prime Minster Bruce Golding at the G-20 in Canada. It is time for the international community to move from the paralysis of analysis to designing and funding a debt restructuring facility specifically to alleviate the debt crisis of the small, middle-income developing countries, including those in the Caribbean.

Do you feel buying into Facebook now is a good investment for the long-run?
	Yes
	No

View Results
Results published weekly in Sunday Finance

Username:
Password:

GCT to go down, white rum prices going up

Int'l community couldn't care less about Caribbean debt crisis