An international economic consultant is warning that Barbados and other Caribbean countries are at the tipping point of a serious debt crisis.
“There is now a growing sense that the world needs another new global initiative on debt,” said Jwala Rambarran, a former Governor of the Central Bank of Trinidad and Tobago.
His sobering declaration was made yesterday during the virtual launch of a report entitled: Caribbean Emancipation 2030: A Sovereign Debt and Climate Justice Initiative for Caribbean Small Island Developing States (SIDS).
Rambarran, who authored the study on behalf of the Caribbean Policy Development Centre (CPDC) contended that there’s now a need for a fresh solution to address this state of affairs.
One chart in the findings of the study placed Barbados in a red zone as the Caribbean country with the highest gross public debt of 157 per cent of Gross Domestic Product (GDP) in 2020.
“The six countries that are in red, if more economic or climate shocks persist, it’s quite likely that those could go further into the red zone. The issue now is if those countries that are in the orange zone, if those shocks continue, they are likely to migrate of course into the red, and we would now have the makings of an imminent debt crisis in the Caribbean,” he predicted.
Rambarran suggested that Barbados’ high debt situation has resulted in monies being diverted to service debt causing the physical and social infrastructure to suffer.
“That is where the real issue is, that there is just not enough…even if the revenue is there, the revenue is earmarked to service debt and not for developmental needs. That is where the big impact is,” he contended.
“Over the last decade, you have seen it in Barbados where the infrastructure has deteriorated. You look at Bridgetown. Bridgetown does not look as clean and serene as I knew it to be when I used to come there in the younger days. It just doesn’t look like that. The gloss and sheen that were there are no longer there.
“You drive through you also see a number of properties for sale, you also have properties…sitting really dilapidated. I was in Barbados Hilton over the weekend gone and you could see the infrastructure has suffered. You are seeing rotten wood on the ground floor, which is unheard of in that Hilton,” the economic analyst observed.
He suggested that should Barbados fall into another debt crisis, the first thing it would have to do is to cancel all of its debts, something he thought was unlikely to happen.
Rambarran also said that with Barbados’ total debt standing at US$6.908 billion – US$2.2 billion in external debt and US$4.7 billion in domestic debt – the island may have to undergo another restructuring through the International Monetary Fund (IMF).
The former advisor on the IMF’s executive board further suggested that as the country prepares to return to the fund, the new Resilience and Sustainability Trust (RST) which it set up in May, would be an important facility for Barbados at this time because it offers concessional lending. Earlier this month, Prime Minister Mia Mottley told a press conference that Barbados would be going back to the IMF for a total of US$340 million to assist the island over the next three years.
As a major step toward implementing solutions to the debt problem, Rambarran recommended a strong advocacy campaign that would attract buy-in from global financial institutions and influencers.
“The advocacy framework talks about a number of the lessons that would come from Jubilee 2000 [a global campaign that led ultimately, to the cancellation of more than $100 billion of debt owed by 35 of the poorest countries],” the top economist pointed out. (EJ)