Caribbean Export OUTLOOK 3rd Edition

IS IT TIME FOR A NEW CARIBBEAN MODEL?

BY PROF. AVINASH PER SAUD

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government, but on its own, that would not solve the debt problem. Its real cause lies elsewhere: next to no sustainable growth. Many business people believe that if you lower taxes and the public sector wage bill, growth will spontaneously combust. Belief is not enough. The unpleasant, plentiful evidence is that this on its own does not work and would worsen the debt position. Tax rates are not so high that they are at the Laffer point where their reduction leads to higher revenues. The real problem is not how much taxpayers spend on public wages, but the quality of the service they get for it. Improving efficiency may mean fewer better treated and paid staff directly employed by government and with no reduction in the overall wage bill. From the start of independence in the 1960s to the late

t is now a familiar observation that the Caribbean has become the most heavily indebted region in the world. Belize, Grenada, Jamaica, and St. Kitts & Nevis have lowered their debt through restructuring in the recent past and others may follow in the near future. In other regions of the world, fiscal unsustainability is caused by challenges to raising taxes. Elsewhere the problem is a bloated public sector, busted state enterprises and expensive wars and military expenditures. In the Caribbean, the public sector wage bill is not small, but it is in fact not far from the average for small developing countries. Expenditure on public services is not the reason for exceptionally high levels of debt. There are good reasons and plenty of room for more efficient taxation and

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