By Anika E Kentish
BARBADOS – Regional governments are being cautioned to tighten their financial regulatory controls. The warning comes from the International Monetary Fund (IMF) as it launched its Regional Economic Outlook released in Bridgetown on Thursday.
“Financial sector fragilities in the region are more troubling. In the Eastern Caribbean Currency Union (ECCU), financial sector health indicators have continued to deteriorate,” IMF Western Hemisphere Deputy Director David Vegara said.
Making specific mention of the intervention of the ABI Bank and the pending resolution to the British American Insurance Company and Clico, Vegara said that these were “trying times.” He added that public debt continues to be a major problem.
“Public debt in most Caribbean countries has increased sharply since the crisis. The increase largely reflects a deep and prolonged economic recession, which has affected debt dynamics,” he said.
According to Vegara, countries carrying a heavy debt burden could feel further pressure by a further slowdown in advanced economies.
“Greater resolve is required in reducing public debt (which is up over 9 per cent of GDP since the crisis) and resisting fatigue in some countries, where pressure to increases wages and subsidies have intensified. Fiscal consolidation efforts should, to the extent possible, preserve growth and competitiveness by avoiding step cuts in infrastructure spending,” Vegara said.
The Washington-based institution singled out Barbados, St Kitts & Nevis, the Bahamas and Jamaica for their spiralling debt, which it says exceeds acceptable levels.
But even as the IMF has issued its prescription from the Caribbean, a regional financial expert has warned that belt-tightening measures should not cause additional burdens for citizens and residents.
“We have to be careful in the region that we do not shoot down the economies of the region by taking very austere measures by attempting to connect fiscal imbalances immediately or for a short period of time,” Executive Chairman of First Caribbean International Bank Michael Mansoor said. Mansoor was among the panellists commenting at the launch of the Regional Economic Outlook.
“In these circumstances what we really need to do is to focus on our ability to improve our infrastructure by buying into major financial resources that we have not been accustomed to and we have to work on the other side of the globe, given the fact that on this side of the universe, those economies Europe, US are very constrained,” he added.
According to the IMF, the region is finally exiting the global recession. However the fund has warned that growth remains slow and tourism-dependent countries are particularly vulnerable to the economic slowdown of larger economies.
