Grenada

The small Caribbean island of Grenada offers a salutary lesson on the dangers of loading up with debt for governments tempted by easy money, the Financial Times reported. Since defaulting on close to $200m of international bonds in 2013, Grenada has been trying to negotiate a restructuring deal with its creditors. Now, according to sources close to the discussions, a deal may be approaching following meetings between the government and its creditors in Washington last month. But Grenada’s debt woes go far beyond the hundreds of millions it owes in US dollar bonds.

Grenada’s proposed debt restructuring could take “considerable time,” according to New York-based ratings firm Standard & Poor’s, Caribbean Journal reported. The firm announced Friday that its “SD,” or selective default, rating on Grenada had remained unchanged. Grenada defaulted in March 2013 on its foreign and local currency debt maturing in 2025, ceasing service on $193 million external debt and EC $184 million in local currency debt.

Caribbean countries are lobbying furiously for an extensive international debt relief and investment programme, as politicians become increasingly anxious over the social impact of the region’s economic crisis and the resulting government austerity, the Financial Times reported. Most of the dozen anglophone countries in the tropical archipelago off the coast of the US are struggling with large government debts and lacklustre economies after the global financial crisis hurt tourism, the dominant industry of the Caribbean.

The leader of heavily indebted Grenada is preparing to lower the income tax threshold and make new efforts to catch tax dodgers, The Washington Post reported. The Caribbean nation’s state-run news agency said Sunday that Prime Minister Keith Mitchell is expected to announce the new tax measures during a national address this week. Mitchell recently traveled to the U.S. to meet with representatives of the International Monetary Fund and the World Bank to discuss Grenada’s economy and debt burden. The island is planning a debt restructuring program.

The Grenada government says the international community is willing to restructure the debt owed to it but insists that the island would have to make sacrifices, Caribbean 360 reported. “We expect significant reduction in our debt size and debt programme, we expect to see reduction through a haircut, we expect to see the debt move over a long period with a lower interest rate,” Prime Minister Dr. Keith Mitchell has said.

Three bond restructurings totaling about $9.7 billion in the Caribbean this year are failing to ignite economic growth and may not help the region avoid more defaults, according to Moody’s Investors Service, Bloomberg reported. The bond swaps this year didn’t go far enough to fixing the Caribbean’s “unsustainable” mix of debt and deficits, Warren Smith, the president of the Caribbean Development Bank, said May 22.

Grenada’s government will undertake a “comprehensive and collaborative restructuring of its public debt, it announced this weekend, the Caribbean Journal reported. The government said “circumstances have forced” the move, which will include its US and Eastern Caribbean-denominated bonds due in 2025.