GRAND ANSE, Grenada (Thomson Reuters Foundation) - Caribbean nations weighed down by debts must find ways to restructure what they owe to free up money for investment in climate-change resilience and disaster protection, country leaders said on Thursday.
Debt restructuring could be the best option or a last resort, and other strategies to raise money could be more beneficial, said experts at the annual meeting of the Caribbean Development Bank.
Low growth, economic downturns, disasters and weak fiscal management have left many Caribbean countries with excessively large public debts, such as Antigua and Barbuda, Jamaica and Barbados, experts say.
Without freeing up capital or generating new sources of income, they could struggle to invest and protect against future shocks.
“We believe there is an absolute need, particularly for the most vulnerable countries, to reduce the debt burden that we have incurred over a period of time,” Grenada Prime Minister Keith Mitchell told the Thomson Reuters Foundation.
Since being hard-hit by Hurricane Ivan in 2004, Grenada has negotiated a temporary halt to debt payments to kick in when disasters strike, he said.
It now uses money from a citizenship-by-investment system, in which investors get passports, to pay its debt.
Getting lenders to extend the length of loans or provide interest forgiveness would free up much-needed money, said Gaston Browne, prime minister of Antigua and Barbuda.
“They can utilize those funds for other areas of development, even to assist with climate resilience,” Browne said.
Hurricane Irma last year cost Antigua and Barbuda $220 million, and the country is spending some two-thirds of its tax revenues on servicing its debt, he said.
With low debt, Turks and Caicos Islands has started a national wealth fund to cushion against shocks but other countries need help getting lenders to tackle their debt loads, Premier Sharlene Cartwright-Robinson told the Foundation.
“There’s no other choice but to try and restructure debt to allow them to build back,” she said, adding “Quite a bit of the rebuilding is going to be from humanitarian efforts.”
Jamaica, Grenada and St Kitts and Nevis have defaulted and renegotiated debts in the past, but other countries should exhaust other options, said William Warren Smith, Caribbean Development Bank president.
“It should be a last resort,” he said. “It raises all sorts of red flags about the management of your economy.”
Like Grenada, countries should be temporarily relieved of debt payments in case of disasters, said Vonnie James, president of the Grenada Baptist Association, a church group lobbying for debt restructuring.
“We want to ensure that any debt facilities should be suspended and possibly forgiven until the country comes back to some form of restoration,” he said.
But tight controls must insure that freed-up money is in fact funnelled into resilience projects, said Mark Pelling, geography professor at London’s King’s College.
Low-tech investments in health, sanitation and education are a good option, more likely to save more lives than high-profile infrastructure projects, he said.
“It needs strong government to make sure that money is looked after and spent wisely,” he said.
(This story has been refiled to show lenders, not countries, make debt decision)