When it rains it pours, and that’s both figuratively and literally.
Every day, or so it seems, there is a distressing story about the financial and economic problems confronting the Caribbean.
Whether it is about Standard & Poor’s decision to downgrade Barbados’ credit rating yet again, going from BB-plus to BB-minus; about the mountain of debt owed by Barbados, Jamaica and St Kitts-Nevis; recent defaults in Grenada and Belize; the negative impact of the tough terms imposed by the International Monetary Fund on Jamaica; the widening deficits and lack of economic growth in Barbados and the Bahamas; or the questions being raised about the strength of the Eastern Caribbean dollar, the story is usually the same: tough times are a fact of life and there is no end in sight to the financial woes.
Two weeks ago, we were advised there was a looming “Caribbean debt crisis” and that the “small debt-ridden countries could benefit from divine intervention”. The Economist, one of the world’s best-known English language weekly news publications, suggested the nations and religious ministers in our region may have to pray to the Almighty for some form of debt forgiveness if they are to get out from under the crushing weight of debt.
Last week S&P, the Wall Street credit-rating powerhouse, reminded the financial markets that the Bahamas and Barbados faced the distinct possibility of credit rating downgrades that would make it more difficult and costly for them to borrow money on the international financial markets. That warning was followed by an actual downgrade which S&P said “reflects the mounting external pressures associated with a persistent current account deficit and external financial challenges, as well as the ongoing high fiscal deficit largely because of a substantial fall in government revenues as a result of a weak economy.” The action wasn’t unexpected.
When the country, which a few years ago had a stellar rating of A-minus was forced to shelve an attempt to raise US$250 million in loans in the international markets because investors weren’t eager to buy Barbados bonds, the next move was fairly obvious.
But the English-speaking countries aren’t alone.
Puerto Rico, too, is facing a debt crisis and while few analysts expect the American territory to default, investors are noticeably jittery about buying its bonds. The potential crisis came home to everyone when Puerto Rico had to mount an extensive public relations campaign in the United States to convince investors that their money was safe in government hands in San Juan.
“Honouring debts is not only a constitutional but also a moral obligation,” Alejandro Padilla, the territory’s Governor, told potential investors recently.
The real reasons why Caribbean countries, especially those in CARICOM, are being so hard hit range from anaemic economic growth; government expenditures seemingly spiralling out of control; debt rising to unimaginable heights; and a poorly performing tourism sector to a lack of political will by governments to cut expenditure and tell the populace the hard truth and that is their birthplaces can’t afford the public sector wage bills which must be paid.
With taxes already sky-high, voters are shouting blue-murder that they are already being taxed out of their houses and land.
Apart from praying for God’s hand and asking for “jubilee,” a Christian term that hints at a one-off debt forgiveness initiative, Caribbean countries must trim their governments’ sails. That’s certainly the case in Barbados, Grenada and Jamaica. A stronger dose of austerity is required and so are decisiveness and tough decisions.
An acceptance of those hard bits of reality must hit home. Barbados must make up its mind about seeking IMF help before it’s too late to avoid onerous conditions in exchange for loans.
In most Caribbean countries, Barbados and the Bahamas included, inefficiency in revenue collection has made a bad situation worse and the widening deficits are in turn forcing the countries to borrow more money. It’s a problem that is feeding on itself and praying alone isn’t going to end the dangers. After all, we are reminded that the Almighty helps those who help themselves.
