If we are to be our brothers keepers…
Caricom heads pose for a photo op. (Photo: Philp Lemonte)

The Caribbean is highly indebted with a history of debt defaults and a debt burden made worse recently by the novel coronavirus pandemic and the global economic recession which, we expect, will be exacerbated by the Russia-Ukraine war.

The question being asked is, is there a case for debt cancellation and debt relief which Caricom leaders have been mooting? Our answer is yes, but not on the basis of us being small countries and not where there is poor economic management.

Debt cancellation must be justified on the grounds that the debt is a reflection of global economic circumstances beyond the control of even the most careful government.

From the beginning of recorded history governments have engaged in borrowing, excessive borrowing, debt default and debt rescheduling. What has not been common in the narrative is debt cancellation.

Lenders who take the risk of non-repayment usually don’t want to engage in debt cancellation. A few governments have, on occasions, cancelled the debt owed to them by very poor countries or countries afflicted by natural or man-made disasters.

Commercial entities never ever want to cancel debt and are forced to restructure debt owed to them only when it is abundantly clear that the only way to extract some repayment is to take some loss.

In some cases, they are locked into dire situations where they even have to lend some more to enable a government to recover sufficiently to resume repayment on a revised schedule.

Small island developing states (SIDS), like Jamaica, are described as having the structural features of small size, very high import dependence, limited range of resources and exports, beneficiaries of large remittances, small scale but high cost of production because of lack of economies of scale, and firms which are minute by global comparison.

The SIDS tend to have excessive budget deficits and unsustainable public debt. Some even feel that as SIDS they are entitled to special privileges from the rest of the world although their gross domestic product (GDP) per capita makes them middle-income countries.

Such privileges include grants instead of loans, aid on terms granted to the poorest countries, preferential export market entry, preferential price schemes for their exports, protectionist tariffs against imports and exemption from reciprocal trade obligations.

They often restructure their commercial debt, in some instances, after a predictable debt default. Sometimes a write down of debt is done to avoid default, although in technical and legal terms that is a default.

In dealing with government-to-government debt, the SIDS seek debt cancellation as a preferred option to what happened with Grenada when Taiwan attached its assets and took the Government to court in New York to force repayment of funds lent to aid recovery from a hurricane. Eventually a settlement was arrived at.

We don’t share the unwarranted whispered allegations that governments in SIDS have a strategy based on a calculation that they will never be forced to pay in full.

It is good that Canada cancelled the debt of Caricom countries back in the 1980s and recently, Venezuela cancelled the PetroCaribe debt of St Vincent. We hail those countries who believe in the notion that we are our brothers keepers.

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