An International Monetary Fund (IMF) working paper says since growth in the current global economic environment is “virtually nonexistent,” significant fiscal consolidation is inevitable in the region.
The paper, dubbed “The Challenges of Fiscal Consolidation and Debt Reduction in the Caribbean,” 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, the paper says “important policy lessons” are drawn for the Caribbean.
Our economy has a few major problems to deal with:
(1) Our taxation base is way too narrow. How many private sector companies or wealthy households can we tax today? Not many for sure. If we apply higher taxation rates on the very few companies we have, we will speed up their journey to death because it will make them highly uncompetitive.
The solution is to create better conditions to (a) keep the companies we have operating today (b) find ways to favor creation and set up of new businesses.
(2) Our traditional donors have their constraints, Europe is in deep crisis, we dont know what the future of Venezuela can be with the alarming news about President Chavez, China will in the future lend us money, no longer give us money.
(3) The economy growth has been sustained by large infrastructural projects which only bring in a few tax revenue during their period of construction. The tax revenue stream will come from private sector initiatives benefiting from those improved infrastructures.
(4) Our national debt has increased and to make it worse, what is due to Venezuela in the framework of the PetroCaribe agreement is not accounted for in that debt. However, wether we like it or not, we Dominicans will have to repay that debt one day or another. The amount at stake is unknown.
(5) The remittances from our diaspora relatives used to be signficant but have considerably dropped since they are facing challenging times in their new countries.
It might be time to rethink our model of development and find ways to survive by counting more on our own resources. To achieve this we have to urgently create the condition for more private sector businesses to florish in Dominica.
You talking too much sense. This administration is not about sense. In fact they cant understand one thing you have said and the sad part is that goes for most of Dominica which is why you have a Skerrit administration in place and so strong.
It’s all about welfare and handout development. That is what we understand here and will support.
The enlightened ones have been trying to get the Caribbean leaders to unite so as to survive economic storm that is sweeping the globe… But, mental slavery dictates that the white man rule and determine the fate of our people…Where are our leaders who know and understand? I lament for us, the Caribbean people. We have no sense of identity, our history is foreign to us, the sacrifices of our ancestors forgotten. Black men and women who are awake will arise to lead our people and educate our children. My hope. My dream.
You are blaming the colour of our skin for our predicament? This is very lame and insulting.We are just a s good, or bad as anyone else. Instead of wailing let’s pull our socks up and take our fate into our hands. Stop crying about Master. He is long dead, we are on our own now.
First of all it would be nice if they would define fiscal consolidation for us, so we are clear on what it is we are discussing. Too often they use these made up terms and assume that people are on the same page.
Now assuming I know what it is, ie consolidating our taxation, governmental and civil service systems, a few areas of concern come to mind:
“The analysis shows that major debt reductions are associated with strong growth and decisive and lasting fiscal consolidation efforts”. Really? Some examples would be nice. Where in the world has fiscal consolidation been tried and worked? I hope you are not referring to the EU, where the result of all the consolidation is a horrible mess of debt, aka Greece, Spain, Italy…
A second mention : “lessons from successful fiscal consolidation efforts in other regions to guide their fiscal consolidation efforts” Again, where in the world has it been successful? Please inform us.
It is quite possible that fiscal consolidation would be beneficial to the Caribbean, in fact we have been trying to integrate ever since Adam was a boy, however I get the impression that these international organizations are trying to mold us into a form or shape of their own choosing. Is it because it would be easier to control one large Caribbean entity than several independent countries? Could it be that moving the government further away from the people, like in the European model, makes it less accountable to the people and so it would be easier for them to push their cultural and social scatology agenda on us?
Just asking.
You ask very good questions, and unlike you i am awaiting an answer from the experts, i am not assuming anything at this stage.
1. What is ‘Fiscal Consolidation? and 2. Where in the world has it worked??
These are my only questions..
Methinks you will be waiting a long time. These ‘experts’ don’t take kindly to questions.
This is what Doc. Kenny Anthony was speaking about recently. Our island Governemnts all want to be big fish in small ponds.