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Bond restructuring, debt swaps have failed to spur economic growth in Caribbean – Moody’s
Moody’s Investors Service – a major international credit rating agency has revealed that three bond restructurings in the Caribbean this year, totaling about US$9.7 billion, have still failed to ignite economic growth and may not help the region avoid more defaults.
According to Moody’s, the bond swaps this year did not go far enough to fixing the Caribbean’s “unsustainable” mix of debt and deficits.
It said, among Caribbean island-nation economies, only The Bahamas is expected to grow more than 1.5 percent this year.
The ratings agency said the average debt for a Caribbean nation compared with the size of its economy stands at 70 percent, with Jamaica, Antigua & Barbuda and Grenada above the 93 percent ratio that forced Cyprus to seek a European Union-brokered March bailout.
Moody’s said Jamaica’s debt-to-Gross Domestic Product (GDP) ratio reached 140 percent last year.
“A sustained reduction in debt in the region over the next decade will require a combination of aggressive fiscal consolidation and increased economic growth,” said Edward Al-Hussainy, Moody’s analyst for the Caribbean, in the latest report. However, both goals are increasingly out of reach.
Referring to an International Monetary Fund (IMF) report, Al-Hussainy said higher interest rates tied to previous restructuring agreements contributed to a 12.7 percent jump in Caribbean debt from 2008 to 2011, reversing a 15 percent decline over the previous three years.
