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The Challenges of Fiscal Consolidation and Debt Reduction in the Caribbean

Author

Listed:
  • Charles Amo Yartey
  • Machiko Narita
  • Garth Peron Nicholls
  • Joel Chiedu Okwuokei

Abstract

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.

Suggested Citation

  • Charles Amo Yartey & Machiko Narita & Garth Peron Nicholls & Joel Chiedu Okwuokei, 2012. "The Challenges of Fiscal Consolidation and Debt Reduction in the Caribbean," IMF Working Papers 12/276, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/276
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. International Monetary Fund, 2013. "Kingdom of the Netherlands-Aruba; Selected Issues and Statistical Appendix," IMF Staff Country Reports 13/259, International Monetary Fund.
    2. repec:vrs:tejoae:v:13:y:2016:i:2:p:21-29:n:4 is not listed on IDEAS
    3. Marianne, Ojo, 2015. "Long term funding and regulation: facilitating financial stability and development in low income developing countries," MPRA Paper 62383, University Library of Munich, Germany.
    4. Guerra, Sergio, 2016. "Energy efficiency policies in the Caribbean: a manual to guide the discussion," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 40459, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    5. Marianne, Ojo, 2015. "Long term funding and regulation: facilitating financial stability and development (low income developing countries)," MPRA Paper 63406, University Library of Munich, Germany.
    6. Francisco Galrao Carneiro & Rei Odawara, 2016. "Taming Volatility," World Bank Other Operational Studies 24925, The World Bank.

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