WASHINGTON, United States (CMC) – The International Monetary Fund (IMF) says Caribbean countries, saddled with high debt levels and badly affected by the global economic crisis, need to reduce debt and develop new sources of growth to enhance their prospects.

Alluding to participants at a recent regional conference convened in Barbados to explore the Caribbean’s challenges and policy options, the Washington-based financial institution said the global crisis has had a big impact on economies in the Caribbean because of their strong links to the United States and Europe, adding that their recovery has been sluggish so far.

“While governments responded appropriately to the drop in tourism, trade, remittances and capital flows, they now face economic and social challenges that call for fresh ideas and a renewed policy resolve if the region is to reach a brighter, more sustainable growth path,” the IMF said.

The IMF said one of the most difficult issues facing the region is the high level of public debt, and its implications for fiscal sustainability and growth, noting that five of the world’s 13 most indebted nations (as a share of Gross Domestic Product – GDP) are now in the Caribbean.

The IMF said debt has accumulated because of successive years of fiscal deficits and, since the mid 1990s, borrowing by public enterprises and off-balance sheet spending, including financial sector bailouts.