Sunday, March 21, 2004

T&T: Don't lend Caricom countries U.S. dollars, economist warns

Economist Dr Dhanayshar Mahabir has warned commercial banks they should be careful lending Caricom governments millions of US dollars because of the possibility of significant exposure, and advised that they should look to other investments like Euro bonds.

Mahabir said for some time now he has been worried about the developing trend of regional governments being financed by local banks because the requirements were less stringent than those the governments would have had to face if they had had to deal with international lending institutions.

The University of the West Indies (UWI) lecturer, who also worked at the Caribbean Development Bank, said: "The Caribbean is an emerging market and I would think that the banks would be careful about lending to Caribbean governments in any significant fashion because of the risks."

He added: "I know they are our trading partners and part of Caricom but we have also seen what happened to some large US banks who found themselves in trouble by lending to Argentina and then that country having to reschedule debts."

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