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Debt and Economic Growth in the Caribbean Community

Explore the contemporary debt situation in Caribbean countries, analyzing the impact of debt on economic growth and sustainability. Discuss old versus modern approaches, debt service, primary surplus, and factors affecting debt sustainability.

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Debt and Economic Growth in the Caribbean Community

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  1. A Discourse on Debt and Economic Growth in the Caribbean Community by Professor Compton Bourne, PhD, O.E.

  2. CONTEMPORARY DEBT SITUATION CARIBBEAN COUNTRIES ARE HIGHLY INDEBTED Debt as % of GDP

  3. y = af(k) s Contribution of Debt to Economic Growth n+w=k

  4. Debt Sustainability • Old Version Focuses on Debt Service Relative to Fiscal Revenues and Exports of Good and Services. Data Indicative of Problem of Diminution of Debt Capacity. • Modern Version Focuses on Primary Surplus. The Easterly Formulation – ∞ • ∫ e ‾rt (Tt + At - Gt) dt ≥ Do 0 • where T is tax revenues, • A is Net debt inflows, • G is government expenditures, • D is public debt stock, • and r is the discount rate

  5. Debt Sustainability p/(r-g) = Do/Yo Tt + At - Gt) /Yt = (r-g) Dt / Yt Interest Rates Rose and Economic Growth Rates Decreased 1997-2004 in the Caribbean causing the Required Primary Surplus to Increase

  6. Debt SustainabilityAnnual Growth Rate of Real GDP%

  7. Towards a Conclusion THE END

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