Guyana's president says Caribbean is on the verge of bankruptcy

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

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Bahamas Blog International

CARICOM chairman says poor regional production contributes to impact of global crisis

GEORGETOWN, Guyana -- Guyana's President Bharrat Jagdeo has called on Caribbean Community (CARICOM) countries to increase their levels of productivity, which is key to economic advancement.

Jagdeo, who also chairs the regional grouping, said on Monday at an event in Port-of- Spain that the region’s laid back approach may be one of the factors responsible for it not being able to deal with the financial crisis.

“Our (Caribbean) inability to deal with this crisis, I am not speaking about every country, but we have for a long time in this region been less productive. If you look at the productivity in our overall economy it has been declining steeply,” Jagdeo said

He believes poor production, along with high debt overhangs, has caused many countries to face hardship due to the global economic crisis.

He noted too that Caribbean countries have borrowed so much from the lending agencies that every year the servicing of their external debts has been racking up and is now getting to a stage where some countries are using too much for this purpose.

Jamaica, he says, is one such country, which at one point has been using over 100 percent of its gross domestic product (GDP) to service external debts.

Jagdeo noted that such a situation spells trouble for the regional economy.

“How can you build a viable medium term strategy with a debt overhang in the region that is about 90 percent of GDP and includes commercial debts at high interest rates?” the president asked, adding, “It's almost impossible, sucks the life out of the economy.”

Jagdeo, who also chairs the CARICOM economic task force, noted that it is now time to create a new model, which he says will place heavy emphasis on debt relief for Caribbean countries.

He noted that Guyana was no exception from this high debt overhang as at one stage this country was using over 90 percent of its GDP for this purpose.

This has changed and the country is now using just about 4 percent of its GDP for servicing of external debts.

December 4, 2009

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Bahamas Caribbean Blog International

CARICOM must adopt new economic model, says Guyana president

PORT OF SPAIN, Trinidad (GINA) -- The Caribbean Community (CARICOM) is seeking international support for a new economic model which President Bharrat Jagdeo says is needed to meet the peculiarities of the region.

Backing for the new model is being canvassed and United Nations Secretary General Ban Ki-moon and the heads of several multilateral financial institutions are to join CARICOM leaders in Dominica in March to discuss it, President Jagdeo told reporters here.

Jagdeo, current CARICOM Chairman and head of the regional economic task force addressing the impact of the global economic crisis on the 15-member community, maintains that the model of economic development the region has been pursuing is not sustainable given its peculiarities.

The impact of the global crisis and climate change were the two major issues before Commonwealth leaders at their 20th summit here, the President told reporters late Saturday.

He said the huge debt overhang and massive sums spent to service debt have affected the community’s capacity to intervene in the crisis which has had a major impact on its members.

He noted that the two largest industries in the region – tourism and the financial sector – have been affected and capacity and fiscal space to do anti-cyclical spending has been limited because of the debt overhang.

“There is no way we are going to build a viable medium term economic strategy without a change in the model”, Jagdeo insisted.

He said that CARICOM heads Saturday advocated a deferential approach to a global economic system.

Most of the large countries were speaking about their efforts to support demand at the global level through the G20 and that’s vital for the future and for those countries to pursue free trade as a way of expanding global GDP, he acknowledged.

“But for countries like ours, many of those things would have sometimes a negative impact – the impact of reciprocity and removal of preferences which have led to the destruction of two major industries in the Caribbean – sugar and bananas.”

He said CARICOM has argued that the model that would be viable for the Caribbean would be one that sees debt relief for middle income countries; special and deferential treatment in the global trading system; dedicated instruments from the multilateral financial institutions (MFIs) to target the special vulnerabilities of the region – like a contingent line of credit to deal with hurricanes and other natural disasters which have a systemic impact on their societies.

The new economic model and climate change were the two big issues for the region, he said, adding, “It was important that we advocated for both and that we seek the support of this broad range of countries across the world because this support would be vital when we get to the WTO (World Trade Organisation) or when we take specific measures to address these issues at the boards of the multilateral financial institutions.”

Jagdeo said the President of the World Bank, the Deputy Managing Director of the International Monetary Fund (IMF), the President of the Inter-American Development Bank (IDB) and the UN Secretary will be at the CARICOM intersessional meeting in Dominica in March.

“I hope that with their support plus the political support, particularly from the countries in the G20, we may be able to get some progress in this regard”, he said.

The President chaired a meeting Saturday between CARICOM and British Prime Minister Gordon Brown and said he dealt with the impact of the global financial crisis on the Caribbean.

“We asked for support of this model that we intend to pursue”, he announced.

He noted that two current British initiatives are counter to the region’s efforts to develop its crucial financial sector and tourism sectors.

The Air Passenger Duty (APD) implemented by the United Kingdom has had a discriminatory impact on the Caribbean by making it far more expensive for British tourists to visit the Caribbean while it is cheaper for them to go to Hawaii or Vancouver which are almost twice as far from London as Barbados.

Jagdeo said CARICOM asked Brown for a rebranding of the Caribbean and he advised that the community work with the British Chancellor of the Exchequer on this matter.

CARICOM states have also encountered difficulties in many parts of the world on signing the tax information exchange agreement to get off the `grey list’ and urged Brown to help get these countries to move swiftly to resolve those issues, he said.

Some CARICOM members are facing an adverse impact because of being `grey listed’ and some financial institutions have already moved from those jurisdictions.

He stressed that the continuing global crisis is not splitting CARICOM although several member states are in difficulties because of reductions in tourism flows, revenue from the financial sector and remittances from developed countries.

“These are real problems and while we have to deal with the long term structural issues – debt and its future servicing, the structure of our economies -- we also have an immediate problem of finding enough cash resources to meet the day-to-day needs of the countries.”

“We have to find a source of bilateral funding. Given what’s happening in the world and the difficulties facing many countries, the only access available is through the multilateral financial institutions and many countries did not have any recourse but to turn to these institutions”, he said.

“We have decided to act in concert and I think there’s a greater sense of urgency”, the President added.

He said CARICOM leaders at one time were too complacent and felt that the current crisis was inevitable – whether there was a global recession or not -- because some were accumulating unsustainable levels of debt and using a larger share of the recurring budget to service that debt.

Total factor productivity in the economies was also declining for several years, he said, adding that this was unsustainable in itself.

November 30, 2009

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