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Publication Details

New The Emerging Debt Problems of Small States   Dinesh Dodhia is a former senior staff member of the Commonwealth Secretariat. Since 1995 he has been managing director of Rappidd Consultancy Ltd, which provides specialist advice on economic and development issues to international organisations such as UNCTAD, the World Bank, African Development Bank, Commonwealth Business Council and Crown Agents. Dinesh Dodhia, Series name: Economic Paper Series Series number: 78 Size: 240 mm x 165 mm ISSN: Categories: Economic Paper Series, Economics ISBN No: 978-0-85092-868-6 Format: Paperback Publication Date: 04-2008 Number of Pages: 104 Status: In stock Price: £ 10.00    [Currency converter]   Download a PDF with additional information for this publication Description In recent years there has been a significant rise in the indebtedness of small states. However, unlike major debtors and the Heavily Indebted Poor Countries (HIPCs), the emerging debt problems of small, mainly middle income, states have received little international recognition and attention.   Thirteen small middle-income Caribbean economies are amongst the most indebted thirty emerging market economies in the world. Similar conditions apply in a number of other small economies in Africa, the Indian Ocean and the Pacific.   Dinesh Dodhia examines the history of this indebtedness, its likely causes in different economies, and prospects for dealing with the debt problem in the future. He argues that there is a need for a comprehensive international framework to deal with it, covering:   fiscal discipline in small states themselves improved debt recording and debt management insurance and grant financing mechanisms that respond to the challenges posed by natural disasters continued grant and concessional financing for small states adequate compensation for preference erosion, and support for the efforts of small states to promote private investment for diversification and growth.   This is the first substantial investigation of a newly-recognised international problem.       Contents Preface Acronyms and Abbreviations   Summary   The Emerging Debt Problems of Small States: Causes and Prospects Introduction Factors Responsible for Rising Debt Indicators in Small States Future Debt Prospects An International Framework to Address Small States’ Debt Problems The Need for a Comprehensive Framework Fiscal Discipline Debt Recording, Management and Restructuring Mechanisms for Responding to Natural Disasters and Other Shocks The Crucial Importance of Concessional Financing Compensating for Preference Erosion and Promoting Private Investment by Mitigating Endowed Handicaps   Part I. The Emerging Debt Problems of Small States: Causes and Prospects   1. Introduction   2. Rising Debt Burdens in Small Economies: Some Stylized Facts Caribbean Small States Pacific Ocean Small States Indian Ocean and African Small States   3. Factors Responsible For Rising Debt Indicators in Small States A Quantitative Assessment of the Role of Different Factors Reduced Contribution of Growth Caribbean Small States Pacific Ocean Small States Indian Ocean Small States Deterioration in Primary Balances Caribbean Small States Pacific Ocean Small States Indian Ocean Small States Rise in Interest Costs Caribbean Small States Pacific Ocean Small States Indian Ocean Small States   4. Future Debt Prospects Caribbean Small States Pacific Ocean Small States Indian Ocean Small States   Part II. An International Framework to Address the Debt Problems of Small States   5. The Need for a Comprehensive Framework   6. Fiscal Discipline and Benchmarks Fiscal Adjustment Experience and Strategy Fiscal Benchmarks and Fiscal Responsibility Laws The Need to Build Domestic Consensus Antigua Workshop Statement: Conclusions on Fiscal Discipline   7. Debt Recording, Management and Restructuring Improving Financial Statistics and Debt Management Debt Restructuring Antigua Workshop Statement: Conclusions on Debt Recording, Management and Restructuring   8. Insurance, Contingency and Grant Financing Mechanisms to Respond to Shocks Domestic Measures Damage Preventive Measures Insurance Special Measures for Low-income Households and Budget Contingency Provisions Regional and International Measures The Caribbean Catastrophe Risk Insurance Facility IMF Facilities Assistance from the World Bank and Other Multilateral Institutions The Need for a Grant-financed Mechanism that Responds to Natural Disasters Antigua Workshop Statement: Conclusions on Mechanisms to Respond to Natural Disasters and Other Shocks   9. The Crucial Importance of Concessional Finance Debt Sustainability and Assumptions About Concessional Funding Multilateral Institutions and Access to Concessional Resources Bilateral Donors Antigua Workshop Statement: Conclusions on the Importance of Concessional Resources   10. Compensating for Preference Erosion and Promoting Private Investment by Mitigating Endowed Handicaps Debt and Private Investment Preference Erosion and Private Investment Compensatory Financial Assistance for Preference Erosion Offsetting Endowed Handicaps for Private Investors in Small States Antigua Workshop Statement: Conclusions on Compensating for Preference Erosion and Promoting Private Investment   Appendix 1. Final Statement of Workshop on Addressing the Debt Problems of Non-HIPC Small States, 23–25 July 2007   References   Tables 1.1 Small States: Population and Per Capita Income 2.1 Public Debt Ratios in the Caribbean 2.2 Pacific Island Economies: Public Debt Indicators (Percentage of GNI) 3.1 Quantitative Assessment of the Factors Responsible for the Rise in the Public Debt Ratio in Selected Small States 3.2 Very Highly and Moderately Indebted Small Island Economies: GDP Growth Rates (%) 3.3 Caribbean Economies: Primary Balances 3.4 Caribbean Economies: Interest Costs (Percentage of GDP) 3.5 Caribbean Historical Average Interest Rates (Past 10 years) 3.6 Caribbean: ODA Flows and Share of Concessional Debt in Total External Debt 3.7 Pacific Ocean: ODA Flows and Share of Concessional Debt in Total External Debt 3.8 Indian Ocean: ODA Flows and Share of Concessional Debt in Total External Debt 4.1 Caribbean: Public Debt Ratio Prospects, 2011 – Debt Sustainability Scenarios and Bound Tests 4.2 Pacific Ocean: NPV Public Debt Ratio Prospects, 2011 – Debt Sustainability Scenarios and Bound Tests 7.1 Jamaica: Summary of Public Debt by Currency and Maturity 7.2 ECCU: Creditor Composition of Public Debt, End-2004 7.3 Institutional Arrangements for Debt Recording and Management in the Caribbean   Boxes 3.1 Analytical Underpinning of Public Debt Increases 3.2 Small States: The Impact of Natural Disasters on Growth and Fiscal Balances 3.3 Small States: Preference Erosion and its Impact on Exports, GDP Growth and Fiscal Balances 7.1 Belize: The High Cost of Recent External Financing Arrangements 10.1 Key Features of the Proposed Model Facility