ACS official: Caribbean debt can cause fiscal crisis

Port-of-Spain, February 26- The heavy burden of debt in most Caribbean countries can have a negative effect on the region, Alberto Duran, Director of Trade of the Association of Caribbean States (ACS) has warned. He said there are “clear signs of potential fiscal insolvency and an excessive debt situation”.

Duran said: “The simple average of the public debt ratio to Gross Domestic Product (GDP) in the Caribbean for 14 countries in the IMF database for the period 1999-2011 was 72.32 per cent, and in 2011 this indicator reached 74.35 per cent. This continues to have a significant impact on growth and development in many countries. In addition to this, we must add the global financial crisis which further worsened the situation of these countries”.

Duran, who spoke on behalf of ACS Secretary General Alfonso Múnera at a meeting of the Latin American and Caribbean Economic System (SELA) in Port-of-Spain, said some attempts have been made by regional countries to reduce their debts but it has not had much impact.

“Some countries have made several attempts to reduce their respective debts, particularly through restructuring and fiscal consolidation. However, initial gains have been smaller or were not sustainable due to the lack of comprehensive reforms to complement the efforts of adjustment,” he said. Duran warned of a fiscal crisis if the debt burden is not reduced.

“Easing the burden of the debt turns out to be fundamental, so it is important for Caribbean society to move forward. We have to face the imminent threat of a fiscal crisis, the large costs of debt in the economy, the impact on investment of the private sector’s foreign direct investment (FDI) and unsustainable economic growth. In other words, the public debt has negative effects on economic activity. Thus the debt can become a brake on economic growth.

“For these reasons, we want to address the issue of public debt and fiscal sustainability from a comprehensive perspective. We applaud the efforts of the SELA for the carrying out this work, through the consultant’s research, Mr Victor Olivo, who produced a document that will be our effective guide throughout our deliberations,” Duran said.