The Challenges of Fiscal Consolidation and Debt Reduction in the Caribbean

By Charles Amo Yartey, Machiko Narita, Garth Peron Nicholls, Joel Chiedu Okwuokei

November 19, 2012

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Charles Amo Yartey, Machiko Narita, Garth Peron Nicholls, and Joel Chiedu Okwuokei. The Challenges of Fiscal Consolidation and Debt Reduction in the Caribbean, (USA: International Monetary Fund, 2012) accessed December 21, 2024

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.

Subject: Asset and liability management, Debt reduction, Expenditure, Fiscal consolidation, Fiscal policy, Fiscal stance, Public debt

Keywords: A number of expenditure reduction measure, Africa, Capital expenditure, Caribbean, Country, Debt reduction, Economic growth, Fiscal consolidation, Fiscal policy, Fiscal stance, GDP, Global, Government, Government spending, IMF staff, Percent of Gdp, WP

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/276
Stock No:

WPIEA2012276
ISBN:

9781557754967
ISSN:

1018-5941

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