DEBT SUSTAINABILITY IN THE ECCB AREA

The rate of growth of public sector external debt obligations, and the nature of the debt contracted by the member countries of the Eastern Caribbean Central Bank over the last ten years signals the need for proper debt management policies and the maintenance of sustainable debt levels. Debt sustainability, by definition, refers to a country 's ability to service its debt obligations without contributing to fiscal imbalances in the economy. Fiscal imbalances are often manifested in the accumulation of arrears on external debt, and the need to resort to debt rescheduling and other forms of debt relief. This paper defines the concept of debt sustainability and assesses some of the factors that affect debt sustainability among the member countries of the Eastern Caribbean Central Bank. It outlines the level of external debt outstanding, debt repayments and the debt service arrears of these countries between 1988 and 1998. Further, the paper examines the level of concessional borrowing, interest rate variability and other indicators of debt sustainability and their impact on the macro economic accounts. The paper concludes with recommendations for the development of debt management strategies that will assist these countries in maintaining sustainable debt levels.