AS YET ANOTHER challenging year for Caribbean countries comes to an end, it is almost impossible not to reflect on what possibly lies ahead for our small, open economies, with very limited resources and flexibility in terms of economic options to allow for the restoration of macroeconomic order, and provide the required services that can benefit their respective populations as well as reinstate confidence among consumers and investors alike.
As we look across the region, there are many and varying challenges facing various countries. However, it is fair to conclude that the fiscal and debt problems stand out as the most burning issues to be confronted.
This conclusion is based on the fact that not only is there that close connection between fiscal deficits and debt accumulation, but also the impact of fiscal deficits and debt on economic growth.
It is not too difficult to understand that any country faced with huge and rising fiscal deficits and public debt will find it increasingly more difficult to generate economic growth led by the government since much of the financial resources for so doing have to be directed elsewhere.
And that problem is compounded by the fact that finding additional sources of tax revenue is becoming more and more elusive since most countries are virtually at their limits in terms of finding new instruments of taxation.
Since, therefore, increasing taxation does not seem to be a feasible option for Caribbean economies in 2015, then the approach to reducing their fiscal challenges has to focus on issues such as improvements in efficiency in tax collection and administration, exploring non-tax sources of revenue such as the citizenship by investment programmes that some countries are already undertaking, reductions in public expenditure, and generating sustained levels of economic growth.
Of these options, the one that holds the greatest promise in terms of medium to long term economic viability is logically the growth-enhancement strategy.
If as a people we accept that growing our economies in a sustained manner should be our top priority in 2015, then, it is obvious that our governments have to lead by example and working in collaboration with other key stakeholders come up with workable growth strategies for the medium to long term.
It would be a serious mistake to focus on a few public sector capital projects that have the capacity to impact economic activity in the immediate period without any serious considerations given to private investments, whether local or foreign.
You see, given our experiences over the past five or so years, it should become clear to all and sundry that private investment has to become the main target for generating permanent employment opportunities, higher economic activity, and foreign-exchange earnings to put our economies back on the road to prosperity.
Our governments cannot lead the transformation of our economies by going it mostly alone.
Therefore, to grow our economies in a sustainable manner we need a combination of public and private sector investment projects in mostly productive activities and a business climate to allow us to attract much needed foreign direct investment. Nothing else will suffice.
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