Barbados is the quintessential Caribbean paradise, a rum-soaked, sun-scorched bolthole for the rich and famous for over a century. It is also teetering on the edge of bankruptcy.
The island was for decades one of the better-run statelets in the Caribbean, and remains one of the wealthiest. But the island’s tourism industry has struggled in the wake of the financial crisis, and a burst real estate bubble added to the economic toll.
The country’s finances are now a mess, and government debts have now ballooned to over 100 percent of gross domestic product – perilously high for a small island state – despite the authorities sacking the equivalent of 1 percent of the island’s population from the public payroll. Including the National Insurance Scheme, the gross debt-to-GDP ratio is about 137 percent.
But the woes of Barbados are by no means unique. The Caribbean region has slowly but surely become one of the most indebted in the world, with liabilities often far beyond what is safe for such small, open and undiversified economies.
“Unlike elsewhere, the build-up of debt in the Caribbean region was not sudden or caused by the global financial crisis. It happened gradually and almost unnoticeably over many years,” Moody’s said in a recent report on the region entitled “The Silent Debt Crisis.” The rating agency estimates that the debt-to-GDP ratio is over 60 percent for 12 of the 20 Caribbean countries for which it has data. Six have debt-to-GDP ratios of over 80 percent, and four have over 100 percent.