BRIDGETOWN, Barbados: The International Monetary Fund (IMF) has announced that 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.
Alluding to participants at a recent regional conference held in Barbados to explore the Caribbean’s challenges and policy options, the U.S.-based financial institution said the global crisis has had a significant impact on economies in the Caribbean because of their strong links to Europe and America, 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 conference – titled “Caribbean Policy Challenges after the Global Crisis” and organized by the University of the West Indies, the Central Bank of Barbados, and the International Monetary Fund (IMF) – brought together experts from across the Caribbean, Canada, the Seychelles, the United Kingdom and the United States.
“This conference presented a valuable opportunity to exchange ideas and approaches to common challenges, to search for new solutions, and to develop a shared vision,” said Dr. DeLisle Worrell, Governor of the Central Bank of Barbados.
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.
“With mounting interest bills, the global financial crisis caused serious problems for debt management,” it said, pointing out that fiscal consolidation is “critical” to ensuring macro-economic stability, and also to “crowd in” the private sector.
“Conference participants acknowledged that lowering debt would lead to higher growth over time, a finding that is based on considerable research,” the IMF said.
“They accepted also that fiscal adjustment was inevitable since, like households, countries must – over time – live within their means,” it added.
The IMF said participants at the conference discussed ways to manage debt, including the recent debt exchange by Jamaica and debt restructuring by Antigua and Barbuda.
Some of the important factors behind these successful outcomes included “realistic burden sharing, social consensus and a strong communications strategy,” the IMF said.