IMF Formulating Fiscal Plan For Indebted Caribbean

by Leroy Baker, Tax-News.com, New York

19 November 2010

The International Monetary Fund (IMF) has announced the launch of a forum aimed at drafting fiscal solutions for Caribbean territories, many of whom, due to the financial crisis, have experienced significant growth in their already unsustainable debts.

Announcing the forum’s launch, the IMF said: “The recent global financial and economic crisis has brought to the forefront the significant challenges faced by Caribbean countries. Growth has slowed significantly in most economies in the region. At the same time, the fiscal stance has eased and public debt levels, which were already high, continue to increase rapidly, reflecting the slowdown in growth and, in some cases, the authorities’ efforts to use countercyclical fiscal policy to mitigate the impact of the crisis.”

The issues will be discussed at a forum on January 27-28, 2011, organized jointly by the University of the West Indies and the Central Bank of Barbados. The event will discuss issues related to Caribbean regional economic growth, debt, and their associated policy challenges. The three institutions are inviting academics with research work on the above mentioned themes to submit papers for consideration to be presented at the conference.

“We want to bring together academics, researchers, and policymakers to share their knowledge and experience on the most important economic and financial issues in the Caribbean,” said Alfred Schipke, Chief of the Caribbean 1 division of the IMF, which oversees six countries in the region. “The aim is to help the Caribbean countries seize the opportunities and meet the challenges of high and sustained growth as the global economy recovers from the Great Recession.”

“The IMF has been expanding its work and involvement with the Caribbean countries,” said Dr. Andrew Downes, Director of the Sir Arthur Lewis Institute of Social and Economic Studies of the University of the West Indies in Barbados, and a member of the IMF’s Regional Advisory Group for the Western Hemisphere. “This conference will be an excellent opportunity to broaden the discussion and for the academic community to influence the formulation of IMF programs.”

The announcement comes after the publication of a report by the IMF on growth and debt in the region on October 22.

In the report it was acknowledged that the accumulation of debt has been a significant drag for growth in the CARICOM countries. It was reported that CARICOM countries debt-to-GDP ratios are over 60%, with many of the world’s most indebted territories from the region, including Saint Kitts and Nevis - the third most indebted in the world - with a deficit of 185% of Gross Domestic Product (GDP).

It was noted by the University of West Indies that the report captured “the stark and disturbing truth about developments in the Caribbean.” The lack of growth in the Caribbean, a spokesperson said, “was not endemic to the region but rather institutional” and that what is needed is “a strengthening of the institution of the state and the capacity of governments.”

Upon the report’s release, the IMF’s senior resident representative in Jamaica, Gene Leon, said: “The medium-term growth outlook for the region is highly dependent on the commitment of governments to reduce the debt overhang, the implementation of investments to improve productivity and competitiveness, and the continuation of policies, including the building of buffers that can reduce the impact of shocks to macroeconomic and financial stability.”

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