Caribbean Debt Default Warning | Business
The Bahamas and Trinidad and Tobago have been singled out as the next two Caribbean countries expected to default on their sovereign debt, with widespread repercussions on their economies, their populations, their creditors and, ultimately, political prescriptions. correctives that are likely to come to rescue vehicles such as such as the International Monetary Fund (IMF).
Chief economist of Barbados-based fintech company Bitt Inc, Marla Dukharan, warns that long periods of economic policy inaction by successive governments and the fallout from the ongoing COVID-19 pandemic, have combined to derail the prospects for economic stability and sustainability in these countries. For the Bahamas, she adds, the economic devastation resulting from the estimated devastation of some US $ 3.4 billion caused by Hurricane Dorian in September 2019 has cast a shadow over the tourism dependent country. Now the COVID-19 pandemic has dealt the nation a double whammy.
She said that following the failures of Barbados and Suriname, the Bahamas would likely be next, requiring short-term IMF restructuring and tightening.
Speaking at a recent virtual panel discussion on the outlook for Caribbean economies during the COVID-19 pandemic, hosted by the Arthur Lok Jack Global School of Business at the University of the West Indies, St Augustine Campus in Trinidad, Dukharan, a Trinidadian, reserved the harshest criticisms for the governments of the republic of the two islands.
The country, she said, has experienced zero growth on average in the 10 years leading up to the pandemic and has drained foreign exchange reserves since 2014, while spending heavily and borrowing only to pay off existing debts that don’t. are not viable.
“We drew on the Wealth Stabilization Fund to pay for recurrent expenses – transfers and subsidies, wages and salaries. Several billion dollars have left the country without our being able to realize it. We continue to use an overvalued currency and to borrow to spend on wages and salaries, transfers and subsidies, ”Dukharan accused.
She said that the country’s labor market participation continued to decline, but no labor statistics had been available since 2019. At the same time, she said, the poverty rate in Trinidad has reached. 25 percent in 2017, but there have been no clear policies to tackle the problem.
The economist lamented the absence of clear objectives in the economic management of Trinidad.
“We don’t know what the political agenda is. We are rudderless, ”she said.
The economist accused successive Trinidadian governments of engaging in a procyclical model of public spending. When the economy is full of resources, there is heavy spending instead of saving for lean times, she said.
“What we need is a countercyclical fiscal policy so that when we are in crisis we have saved enough money so that you can close the deficit and keep spending on certain projects like you have. habit, ”Dukharan recommended. .
She mentioned the case of the Cayman Islands where their currency is worth more than the US dollar. Dukharan says the essence of the Cayman’s economic success has been their fiscal discipline to the extent that they have achieved a budget surplus, where tax revenues exceed government spending, even amid the COVID-19 pandemic.
Citing Jamaica as another positive case, Dukharan said the country, having left its IMF program in 2019, was now on a positive growth path driven by sweeping reforms undertaken over the past decade, as well as by two. domestic debt restructuring.
Barbados, she noted, went to the IMF in 2018, is now experiencing a deep economic contraction, but is on a positive economic trajectory after what she described as “the most abrupt debt restructuring known to be in the world. the man”.
Suriname, she said, was the last to declare an economic default and is in talks with the IMF.
In the pre-pandemic era, Dukharan recalled, the Dominican Republic, later eclipsed by Guyana, was the fastest growing regional economy. She said that despite the difficulties caused by the pandemic, Guyana, with new oil wealth, was still doing well.
“The Guyanese economy was to grow by more than 80%; but instead it’s increased by about half, but it’s still a world record and, even outside of a pandemic, it’s phenomenal, ”she said.