The Caribbean’s Seasonal Jubilee Jumble

Debt forgiveness pleas by religious and social activists, initially aimed at official and commercial lenders during Grenada’s second workout, turned more vocal during the holiday “jubilee” period as the relief spirit of the HIPC program a decade ago was recalled to slash the Caribbean’s average 70 percent public debt and 20 percent current account deficit to GDP levels. A half dozen states have restructured since 2010, and Barbados is now scrambling to avoid IMF resort after a $500 million 10-year failed bond sale on government debt/GDP at 95 percent with a currency peg and recession.  Flat tourism and a “sharp” private capital inflow drop have left reserves below half a billion dollars, according to the Fund’s December Article IV report. The opposition party tabled a no-confidence motion against the Finance Minister, who is trying to cut civil service employment and wages under an improvised austerity program. The checkup criticized the lack of a “comprehensive, strategic approach” to ailing public accounts as it urged greater customs and tax compliance and oversight of state holdings. It recommended reversal of central bank buying of Treasury bills and stricter supervision of bank and insurance asset and collateral positions. A rescue precedent was set by Jamaica early in 2013 when it garnered $2 billion in bilateral and multilateral support after completing another domestic debt rescheduling. The latest installment of its $1 billion Extended Fund Facility was granted with budget execution “broadly on track” on Q3 economic growth of 1 percent and 10 percent inflation reflecting local dollar depreciation. International reserves are back to three months import cover, and a fiscal rule will soon take effect targeting a 60 percent public/debt GDP ratio in 2025, versus over 140 percent today. Securities dealers took portfolio losses from principal reduction and maturity extension and repo squeezes and revamping their regulatory framework is also a priority under the arrangement. Despite the progress ratings agencies have not upgraded the outlook from “high probability” additional default, and rampant crime and on-line scams continue to deter visitors.

In Haiti on the eve of the fourth earthquake anniversary the Fund estimated growth and inflation each around 4 percent the past fiscal year, but decried large electricity and other “costly” subsidies in the face of lower foreign assistance. They divert needed infrastructure spending and prevent the buildup of “buffers” for weather and related emergencies. President Martelly faces internal and external outcry over continued election delays and his desire to reconstitute the army disbanded two decades ago. UN security forces were found culpable in originating the cholera epidemic and the President cites national pride for the project while acknowledging the protective capacity of 10000 trained police.  He claims no outside enemy, but is mired in a diplomatic spat with the Dominican Republic on the joint island over stripped citizen rights for thousands of Haitians long working and residing there. Regional association Caricom denounced the move as debt service naturalization also remained elusive.