Caribbean drowning in debt

She spoke of the need to reduce the debt of English-speaking Caribbean island states, including pardoning part of the region’s debt to create a resilience fund that allows for financing climate change mitigation and adaptation efforts. In this regard, it is hoped that the Prime Minister will ask B?rcena that ECLAC conduct analytical work and publish those results separately for the English-speaking Caribbean. Lumping us with Latin America is not helpful as our levels and types of vulnerability are unique.

The question that must be asked is how bad are these problems? If we were to look at the levels of debt ECLAC reported in 2013, ten countries of the Caribbean (Antigua and Barbuda, the Bahamas, Barbados, Belize, Dominica, Grenada, Jamaica, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines) had total public debt percentages of between 76 per cent and 130 per cent of their Gross Domestic Product (GDP); above the limits of what is sustainable debt.

ECLAC also revealed that total public debt, both internal and external, in 15 countries of the Caribbean (the ten already mentioned plus Anguilla, Guyana, Montserrat, Suriname and Trinidad and Tobago) reached nearly $50 billion dollars, equivalent to 72 per cent of sub regional GDP. Of this amount, about $30 billion corresponds to internal debt and nearly $18 billion to external debt, 46 per cent of which is owed to private creditors and 54 per cent to public creditors.

English-speaking Caribbean countries that are considered to be Small Island Developing States (SIDS) recorded public debt on average at over 80 per cent of GDP in 2014. Globally, debt to GDP ratio of SIDS was on average 64.3 per cent, while SIDS in the Pacific recorded public debt ratios of 33 per cent of GDP, and most other groupings (six in all) of SIDS around the world recorded lower debt ratios than the SIDS in the Caribbean.

The Caribbean has a debt problem. This huge debt is limiting the region’s fiscal space thus hindering island states from funding their own development. This is compounded by the relatively high GDPs associated with these SIDs which make access to overseas development assistance near impossible.

The debt level of a country is considered unsustainable if debt-toexport levels are above a fixed ratio of 60 per cent – or for those countries that have very open economies, where the exclusive reliance on external indicators may not adequately reflect the fiscal burden of external debt – the debt-togovernment revenues are above 250 per cent. Only two territories in the region do not breach the debt-to-export threshold of 150 per cent, while eight of them breach the debt-to-government revenues of 250 per cent. In fact, an additional three countries are close to the threshold with debt-to-government revenues of over 220 per cent. This suggests that for the Caribbean SIDS in general, debt levels are unsustainable.

ECLAC underscores that these high debt burdens reflect the economic and environmental vulnerabilities of these countries which have become a hindrance to development of the SIDS.

As an example of this, it is estimated that between 2000 and 2014 natural disasters caused damage of at least 27 billion dollars in English-speaking Caribbean countries. We have had natural disasters destroy infrastructure that Caribbean Governments borrowed money to build.

They must service that loan but also borrow more money to replace the very infrastructure that has been destroyed.

Natural disasters create more debt in the Caribbean.

There are seven countries in the Caribbean in which total debt service as a percentage of total government revenue is over 25 per cent. The last two decades have been marked by an escalation of debt in most of the countries in the region, with a number succumbing to a high-debt low-growth trap. Not only is fiscal space reduced, but an increase in risk premia results in an increase in the cost of borrowing and the country becomes unattractive to investors. This makes it harder for the Caribbean not only to attract investors, but also to borrow for development.

ECLAC proposed a framework to reduce the external public debt of Caribbean SIDS through the creation of a regional resilience fund to finance climate change adaptation and mitigation measures.

It proposes the creation of a resilience fund that can be financed through instruments such as debt swaps for climate change Adaptation and Mitigation, which require interaction between multilateral institutions, donor countries and debtor countries. The idea is for the beneficiary countries to commit to allotting the resources that they save on debt servicing to this Caribbean resilience fund.

We must commend the Prime Minister for this initiative. If the Caribbean SIDs can have their debt reduced then they can demand more from us and this benefits our manufacturers. Greater demand for our manufacturers, given the desire to grow the non-energy sector, must be encouraged. We urge the Prime Minister to use his office to further this cause - it is in our best interest.