The Challenges of Fiscal Consolidation and Debt Reduction in the Caribbean

 
Author/Editor: Yartey, Charles Amo ; Narita, Machiko ; Peron Nicholls, Garth ; Chiedu Okwuokei, Joel
 
Publication Date: November 19, 2012
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper examines debt dynamics in the Caribbean and discusses policy options for reducing the high debt levels. Based on empirical studies of factors underlying global large debt reduction episodes, important policy lessons are drawn for the Caribbean. The analysis shows that major debt reductions are associated with strong growth and decisive and lasting fiscal consolidation efforts. Since growth in the current environment is virtually nonexistent, significant fiscal consolidation is inevitable in the region. Better control of the public wage bill, increasing public sector efficiency and tackling transfers are the obvious targets to reduce spending. On the revenue side, there is ample room to reduce tax expenditures, eliminate distortions while broadening the tax base. Fiscal consolidation needs to be complemented by a comprehensive debt reduction strategy including tax policy reforms and structural reforms to boost competiveness.
 
Series: Working Paper No. 12/276
Subject(s): Public debt | Caribbean | Fiscal consolidation | Debt reduction | Cross country analysis

 
English
Publication Date: November 19, 2012
ISBN/ISSN: 9781557754967/2227-8885 Format: Paper
Stock No: WPIEA2012276 Pages: 46
Price:
US$18.00 (Academic Rate:
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