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Abstract
The Caribbean economies face difficult fiscal challenges, reflected in their high and rising levels of deficits and debt. Large fiscal deficits and debt have been built up for a variety of reasons, ranging from lack of prudent macroeconomic policies and overspending by public enterprises, to costly financial crises that resulted in government intervention in the financial sector, to simply bad luck. In the Caribbean, like in many other small states and developing countries, bad luck includes frequent and severe natural disasters, which can result in a collapse of economic activity and erosion of fiscal buffers and undermine the sustainability of medium-term fiscal frameworks.
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