Public finances and the challenge of reconciling austerity with growth and equality
In 2015, the region’s fiscal accounts deteriorated slightly in average terms, posting a fiscal deficit of 3.0% of gross domestic product (GDP) and public debt equivalent to 34.7% of GDP...11 of the 19 countries saw both their fiscal deficit and their public debt grow as a proportion of GDP, although from widely differing starting points... In five of those 11 countries, Brazil, Chile, Costa Rica, Peru and Uruguay, both indicators deteriorated by around 1% of GDP...
The Caribbean is currently one of the most heavily indebted parts of the world and, although the global crisis debt did not create the challenge currently facing the subregion, its spillover effects worsened the circumstances of many Caribbean economies. In fact, the Caribbean’s debt situation is much worse than that of other small open economies and has reduced the fiscal space available to governments.
A review of the debt-to-GDP ratio reveals the seriousness of the problem. Apart from Suriname, Trinidad and Tobago, and, to a certain extent, Guyana, all other subregional economies are seriously challenged. Two countries, Jamaica and Barbados, have debt-to-GDP ratios above 100%; while the others range between 68% and 95% of GDP.
In some cases, such as Saint Kitts and Nevis, debt ratios have declined significantly, mainly as a result of IMF related adjustment programs aimed at fiscal consolidation. In some countries however, such as Trinidad and Tobago, Bahamas and Antigua and Barbuda, the debt ratios have been increasing (see table I.3). The fall in commodity prices is likely to impact goods-producing economies in the Caribbean that do not have strong fiscal buffers.
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