Alicia Bárcena, ECLAC Executive Secretary. Photo courtesy Wikipedia.
PORT-OF-SPAIN, Trinidad--Caribbean heads of state and finance ministers met with Economic Commission for Latin America and the Caribbean’s (ECLAC’s) Executive Secretary Alicia Bárcena, to analyse debt relief proposals and other measures to fight the effects of the coronavirus pandemic.
Prime ministers, premiers, finance ministers, financial secretaries and other high-level government representatives from 15 Caribbean countries on Wednesday held a virtual meeting with ECLAC, heads of Caribbean regional organisations and representatives of other UN agencies in the sub-region to discuss the economic impact of the COVID-19 pandemic on their economies, already besieged by both climatic and economic shocks, including heavy indebtedness and high exposure to natural disasters.
The video-conference was presided over by ECLAC Executive Secretary Alicia Bárcena, who connected with heads of state and senior financial decision-makers from ECLAC’s Member Countries and Associate Members in the Caribbean area: Anguilla, Antigua and Barbuda, the Bahamas, the British Virgin Islands (BVI), the Cayman Islands, Dominica, Grenada, Guadeloupe, Guyana, Montserrat, St. Kitts and Nevis, St. Vincent and the Grenadines, St. Maarten, Trinidad and Tobago and the US Virgin Islands. The meeting was also attended by UN resident coordinators in the sub-region, representatives from other UN entities such including the Food and Agriculture Organization (FAO), the United Nations Environment Programme (UNEP), the United Nations Population Fund UNFPA, the United Nations World Food Programme (WFP) as well as regional intergovernmental organisations including the Association of Caribbean States (ACS), the Caribbean Community CARICOM, the CARICOM Development Fund (CDF), the Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio Company (CCRIF SPC) and the Eastern Caribbean Central Bank (ECCB).
Bárcena was accompanied by Director of ECLAC’s Sub-regional Headquarters for the Caribbean in Port of Spain, Trinidad, Diane Quarless, who moderated the dialogue, and other ECLAC experts from that office, including Director of the Economic Development Division, Daniel Titelman from the Commission’s Headquarters in Santiago, Chile.
At the event, Bárcena stressed that Caribbean countries must increase their fiscal space and need more favourable financing conditions, notwithstanding their income-per-capita levels, in order to face the pandemic’s effects. “Considered as middle- or high-income countries, Caribbean countries face a lack of access to liquidity on concessional terms,” Bárcena pointed out. “This is why policy proposals to support economic recovery with a people-centred approach are urgently needed,” she added.
Among the prime ministers attending were Gaston Browne of Antigua and Barbuda and Roosevelt Skerrit of Dominica; premiers included Andrew A. Fahie of the BVI and Easton Taylor Farrell of Montserrat.
All expressed concern at the highly vulnerable economic situation that the countries of the sub-region were currently facing and urged ECLAC’s support of their advocacy in engagement with the international community for better access to grants and concessional financing, given their inability to service debt payments in the current circumstances.
In the words of Prime Minister Browne, “The economic burden for our countries has been unsustainable because of the high levels of debt. We don’t have the capacity for printing money and our policy instruments are very limited. What is required at this point is some level of support from international financial institutions, such as the International Monetary Fund (IMF) and the World Bank. ECLAC can help us advocate and raise its voice for us,” he declared.
Describing innovative ways by which concessional financial assistance might be extended to Caribbean economies, he proposed that consideration be given to having credit extended to countries which have already invested in green technology. He suggested this could be applied through debt relief. He informed the meeting that Antigua and Barbuda was already exploring this option.
St. Vincent Minister of Finance Camillo Gonsalves identified the IMF Rapid Credit Facility (RCF) as an important mechanism which typically offered timely liquidity support free of conditionalities. He urged ECLAC support in promoting new financing instruments for the small vulnerable economies of the Caribbean, and in advocating that valuable financial instruments such as the RCF remain available and unchanged during these challenging times. He also suggested that other innovative instruments such as offering debt forgiveness to countries impacted by the Ebola epidemic in Africa be considered in these similar circumstances created by COVID-19.
Gonsalves also intimated that urgent practical interventions are needed to deal with liquidity challenges, before they become issues of solvency. A strategic plan of support for the countries of the Caribbean in the short term is therefore urgently needed.
Bárcena reassured the sub-region that this dialogue’s results and key messages would be delivered to UN Secretary-General António Guterres, to be considered in his platform of advocacy on behalf of small-island, middle-income countries in his engagement with the international financial community for support.
In her welcome remarks to the Caribbean authorities, Bárcena emphasised that “we find ourselves in very challenging times. There can be no doubt that COVID-19 will have a profound and lasting impact on the welfare of our countries and our region for the next several months. We are putting the Caribbean first in everything we do,” she declared.
“It is commendable that every government has been putting the health and well-being of their populations first, and so I am happy to see the progress that has been made in controlling the spread of infection across the Caribbean. However, this effort has come at a very high cost, particularly in your sub-region, which already suffers a high level of vulnerability to both climatic and economic shocks, and with many of your economies already shouldering debt that is still very heavy, even with progress made to reduce external debt levels in recent years,” she added.
Bárcena added that the impact of the COVID-19 pandemic in the Caribbean countries had translated into both domestic and external challenges, the most significant of which included revenue and income losses, a drop in investment, rising unemployment, increased indigence and poverty, the failure of small and medium enterprises (SMEs) and challenges to the financial system.
The external challenges include the near total shutdown of air and cruise travel, dealing an immense blow to the tourism sector; stress in related supply chains (agriculture, construction, hotels, restaurants); a sharp contraction in larger economies, a downturn in commodities prices, the contraction of foreign direct investment (FDI) flows and remittances; disruption in transportation and global supply chains; risk aversion for external investors and financial turbulence, and restrictions on foreign exchange availability.
She recalled that, according to ECLAC’s latest projections, gross domestic product (GDP) growth in the Caribbean is expected to drop in 2020 by -2.5 per cent, with a downward bias. She also noted that Caribbean countries were spending between one and four per cent of GDP to tackle the COVID-19 crisis, with limited fiscal packages focused on social security programmes, on loan deferrals and liquidity support for SMEs, for increased health care spending on the testing and treatment of critical COVID-19 cases, and for enhanced public health surveillance.
She noted that the high debt levels and interest payments limit public expenditure. She also highlighted the fact that “Caribbean economies have the highest debt ratios in the world, averaging 68.5 per cent of GDP in 2019. Reductions in production and income along with increases in borrowing will further raise debt burdens. Debt is rooted in external shocks, compounded by the impact of natural disasters and inherent social and economic structural weaknesses,” Bárcena explained.
Given the nature of the assistance offered to the Caribbean by international financial institutions and development agencies for facing the pandemic in the short term, increased public debt is inevitable. Moreover, the recovery path of Caribbean countries will be more difficult than those of other economies given the characteristics of their productive structure and in light of the ever-present threat posed by the upcoming hurricane season, the Executive Secretary of ECLAC stressed.
Bárcena also emphasised that the crisis induced by COVID-19 underscores the importance of ECLAC’s proposal for building resilience and reducing debt. ECLAC’s proposal links building resilience to debt reduction and recommends the creation of the Caribbean Resilience Fund (CRF), with a view to the creation of a globally coordinated debt-deleveraging mechanism with a climate component to address the global debt overhang problem: standstills and debt moratorium.
“It is urgent that there be effective coordination and interaction between multilateral institutions, donor countries and small state debtor countries …, including lines of emergency financing,” she insisted.
Bárcena stressed that relief for debt service payments can be extremely useful to supporting financing needs. “The ECLAC’s resilience fund proposal has the potential to offer much-needed long-term relief particularly to middle-income countries. Acceleration of the debt-swap initiative and establishment of the ECLAC Climate Resilience Fund is needed, given the impact of the pandemic and the potential for an active hurricane season in 2020,” she said.
“We have heard from all of you that you need immediate action,” Bárcena said in her closing remarks. “Borrowing is not the answer to confront this crisis. Caribbean countries need grant support fast. There is need for urgent intervention to ensure liquidity,” she said.
“Let me say that we are very much on board. We are part of this. A game plan for the short term is needed and we have to work on this, together with CARICOM, ACS and [Organisation of Eastern Caribbean States – Ed.] OECS. We will continue to advocate for this debt relief, for grants, for concessional funding for the Caribbean countries. And we will make sure that we can all address these issues with one voice, expressed clearly and openly. … We will make sure that the Secretary-General of the UN and his team receive this information with a view to their supporting us at the international level,” Bárcena concluded.