By: Staff Writer
August 7, 2026
The Inter-American Development Bank said in their Caribbean Economics Quarterly for August that the regional fiscal environment has become more challenging due to the persistently high interest rates.
The report added: “Importantly, borrowing costs have increased largely due to tighter global financial conditions rather than a broad deterioration in investor perceptions of Caribbean sovereigns. As a result, many governments face rising debt-service costs even where credibility and market access have been maintained. This means that debt management, fiscal prudence, and the creation of buffers have become even more important than ever.”
The report also said: “Added to this has been a series of large external shocks, with the latest being high and volatile energy prices resulting from disruptions to the Strait of Hormuz. The effects on Caribbean economies will be more severe the longer the disruptions last
“The experience of the Caribbean-6 since the pandemic has been mixed but generally encouraging.
“Barbados and Jamaica demonstrate that substantial debt reduction is possible despite severe external shocks, provided that governments maintain credible fiscal frameworks, strong institutions, and sustained policy discipline.
“Guyana remains a unique case, benefiting from rapidly growing oil revenues and relatively low debt levels, with its challenge centered on managing resource wealth prudently rather than on conventional fiscal consolidation. The Bahamas has achieved one of the strongest post-pandemic recoveries, supported by the tourism rebound and improvements in fiscal balances.
The report continued: “Public debt remains above pre-pandemic levels due to the spike in 2021 from the combined effects of Hurricane Dorian and the pandemic, but the trajectory since then is one of improvement.
“Suriname has implemented significant reforms under a program supported by the International Monetary Fund, including introduction of a value-added tax (VAT), subsidy reform, and debt restructuring. While progress has been substantial, fiscal vulnerabilities remain.
“Trinidad and Tobago remains constrained by the volatility of hydrocarbon revenue, rigid spending, and weak non-energy revenue performance.”
Most of the Caribbean-6 countries are expected to continue on a declining debt-to-GDP ratio path even under adverse scenarios, highlighting the progress that has already been achieved. Simulations of a negative growth shock suggest that debt ratios would rise slightly relative to baseline projections across most countries and thus debt-reduction targets would be delayed.