GEORGETOWN, Guyana -- Guyana's President Bharrat Jagdeo says the Caribbean is on the verge of bankruptcy as many countries are spending more on servicing external debt than their national revenue and has reiterated his call for urgent debt relief by the international financial institutions (IFIs).
Jagdeo who heads a special task force by the Caribbean Community (CARICOM) to assess the financial crisis and come up with solutions told a media conference here on Friday that region’s debt situation is worsening.
“The region is heading towards bankruptcy if countries could be declared bankrupt, many of the countries simply cannot pay their way, and they can’t meet recurring cost and pay their debts, unless there is radical restructuring or increase sources of revenue, the situation will get worse,” Jagdeo declared.
The president believes the poor productivity and the heavy debt build up in the region was responsible for this situation in many Caribbean countries.
This, he said, was exacerbated by the global financial crisis as the demand for exports, remittances and tourism were negatively impacted
“We hope with the abatement of the crisis, not that we are out of the woods as yet and it is still very tenuous , but this may improve the macro-economic fundamentals of these countries, but they simply can’t sustain their large quantity of debts,” he explained.
Jagdeo said during the CARICOM heads meeting with top officials of the World Bank, the International Monetary Fund (IMF) and the Inter-American Development Bank (IDB) earlier this month in Dominica the region’s crisis was highlighted.
He however explained that there is a huge challenge of crafting a regional debt strategy since individual countries have unique debt problems and this must be address on a case by case basis.
The president said that “many countries will not have a good future unless their debt problems are tackled.”
Jagdeo said the situation despite not being amplified is very serious and noted that Guyana was once in this position where it was faced with a huge debt overhang.
“We had that when the debt burden use to suck up over 94 percent of our revenue, it sucked the life out of our economy, and we had tough period of dealing with that,” the president added.
During the heads meeting in Dominica, the World Bank President Robert Zoellick committed to sending experts to the various Caribbean countries to assess their debt management strategies.
Only recently a senior St Lucia government official has said Caribbean countries are facing serious challenges of a similar nature as a result of their high levels of debt.
Director of Finance Isaac Anthony told a Caribbean Development Bank (CDB)/Institutional Investor Roundtable discussion that high debt levels have become a feature of most countries in the region.
“If you look right across the region the story is essentially the same. Revenues have declined substantially, while expenditure has remained pretty high, particularly given the needs of the government to provide much needed social safety net programmes,” said Anthony.
“This has resulted in a significant amount of debt by a number of countries. The question is: how do you really deal with this particular situation; clearly there will be need for the governments to maintain a fiscal policy stance that seeks to boost revenue, keep recurrent revenue under control while maintaining sustainable debt levels,” he told the forum.
Anthony pointed this Eastern Caribbean island as an example, where last year, the economy contracted by 5.2 per cent as a result of the global economic and financial crisis.
March 27, 2010