CARICOM: From vulnerability to resilience

0
119

By Caribbean News Global fav

WASHINGTON, USA – The Organisation of American States (OAS) on Tuesday, August 11, 2020, officially presented the Framework Strategy Document for CARICOM countries: From Vulnerability to Resilience, inclusive of Section 1: Immediate and Long-Term Challenges to the Development Interests of CARICOM countries: Section 2: Why the International Community should be helpful; and, Section 3: Ten priority recommendations – to overcome the challenges faced by Caribbean countries during COVID19.

Sir Ronald Sanders, ambassador of Antigua and Barbuda to the United States and the Organisation of American States, conveyed via Twitter, that: “Caribbean countries welcome this initiative by secretary-general Luis Almagro, to advocate for the sub-region in the international community.”

The Framework Strategy Document: From Vulnerability to Resilience stated in part:

Economic security, health and human security, food security, and environmental security are all intertwined and are all at stake.

The impact of the coronavirus has been transmitted into the Caribbean through five channels: a collapse of the tourism industry; a worsening of financial conditions with an inadequate response from the international financial institutions; a reduction in remittances from developed countries where migrant workers are principally among those who have lost their jobs; a fall in commodity prices resulting from a global rise in unemployment and a consequent drop in demand for commodities; and an abrupt curtailment of foreign investment.

While some of this debt has arisen from soft loan instruments from International Financial Institutions (IFIs), such as the International Monetary Fund (IMF), the World Bank Group (WBG) and the Inter-American Development Bank (IDB), it has increased the debt stock of these countries, which had already been high.

Therefore, they have had to resort to either accepting non-concessionary loans which have worsened their debt burden, or they have opted to struggle on much depleted incomes by deferring payments of debt, thus exacerbating their debilitating debt situation.

Economic collapse beckons as CARICOM states contend with the prospects of a long and damaging recession due to enforced slowdown of economic activity, as well as increased costs of importation of inputs for agriculture, construction, manufacturing and other industries. In addition, there has been an almost total drop in revenues from tourism, the main earner for most CARICOM countries; a worrying decline in remittances; pressures on supply chains in the agriculture, construction and manufacturing sectors; and a fall in commodity prices, the main source of income for some countries, due to the slowdown in global demand.

The imperative is now to establish effective and meaningful collaborative mechanisms to mitigate global risks and threats, raise levels of readiness and promote uniformity of response.

Section 3: Ten priority recommendations

Against the background of this paper which is not exhaustive of the challenges that face CARICOM countries, or of the opportunities that the sub-region provides for lucrative trade, profitable investment and peaceful enjoyment by tourists, the following recommendations are proposed:

  1. The IMF, WBG and IDB and the G20 countries should consider special arrangements for CARICOM countries, including (a) suspension of per capita income as a criterion for concessional financing; (b) debt relief including suspension of debt payments, write- offs of aged debt particularly by the Paris Club; (c) budgetary support through a mix of grants and low-cost loans on a country by country basis.
  1. G20 countries should increase the resources of PAHO as well as direct programs through the Caribbean Development Bank to assist CARICOM countries with the extraordinary public health expenses that have abruptly arisen as a consequence of the effects of COVID-19.
  1. In tourism, US and Canadian authorities should consider the formulation of a cooperative relationship with CARICOM countries in which protocols are established for travel between their countries, by air and sea, under which safe channels are created by pre-testing passengers in countries of departure (both ways), ensuring that such passengers are free of COVID-19.
  1. In energy security, IFIs, and Multilateral Development Banks (MDBs) and private investors should take advantage of opportunities to develop renewable energy sources to which CARICOM governments are fully open as either private-public partnerships or buy, operate and transfer (BOT) enterprises. IFIs and MDBs should also be open to providing financing and technical expertise to local small and medium-sized companies to participate effectively and sustainably in oil and gas industries where they exist in their countries.
  1. With regard to Security, donors – whose own security is tied to events in the CARICOM area – and IFI’s should fund the acquisition of strategic regional maritime and airspace security capabilities under the CARICOM Regional Security Management Framework; and also fund Institutional capacity building and organizational transformation programs for the CARICOM Implementing Agency for Crime and Security (IMPACS), the Caribbean Disaster Emergency Management Agency (CDEMA), and the Regional Security System (RSS).
  1. On food security, specialized multilateral organizations like the Food and Agriculture Organization (FAO), the World Food Program (WFP) and the International Fund for Agricultural Development (IFAD), as well as the Inter-American Institute for Cooperation on Agriculture (IICA), should support studies, transfers of knowledge and technology, and institutional strengthening for regional agencies like the Caribbean Agricultural Research and Development Institute (CARDI) and national agricultural research institutes. Additionally, IFI’s should align their lending policies to the sub- region’s need for food security by providing finance for a regional shipping facility between CARICOM countries.
  1. On correspondent banking relations, a cooperative relationship between US and CARICOM regulators on one hand and US and CARICOM banks on the other, within an agreed framework, should be developed taking into account both the need for strong AML/CTF regimes and the benefits of CARICOM countries continuing to participate in the global financial and trading systems.
  1. The World Bank Group should provide technical and financial assistance to CARICOM’s efforts to transformation to a digital economy, particularly in accelerating the region’s adoption of the framework established in the World Bank’s Bali Fintech Agenda.
  1. The WBG and IDB should help to structure and fund a Resilient Infrastructure Facility, capitalized in the first instance at $5 billion to help the region to exploit the Blue Economy which offers untapped opportunities to enlarge and enhance CARICOM economies as well as to provide new prospects for profitable investment by foreign and local investors.
  1. With regard to hurricanes which, year after year, wreck one or more CARICOM countries, keeping them in a cycle of high debt, it is proposed that IFIs and donor governments establish a “Caribbean Recovery Fund” which would be a rapid response facility addressing the urgent need for rebuilding resiliently after hurricanes but also to build in advance of hurricanes to minimize damage should they occur.

Conclusion

In the absence of immediate international support, CARICOM countries, many of which are already highly indebted, are being forced to incur even more debt to cope with the sudden and unbudgeted costs related to COVID-19. Many of them found little comfort in a joint statement by the IMF and WBG on March 25, 2020, which called “on all official bilateral creditors to suspend debt payments from IDA countries that request forbearance”, adding that “this will help with IDA [International Development Agency] countries ’immediate liquidity needs to tackle challenges posed by the coronavirus outbreak and allow time for an assessment of the crisis impact and financing needs for each country”.

Of the 14 CARICOM countries, only six are IDA countries, defined by their lower per capita income. The remaining eight are excluded from access to concessionary financing and are unlikely to secure any suspension of bilateral debt, including by the Paris Club. This situation will lead to higher levels of public debt and worsening debt-to-GDP ratios, and assuredly default on debt payments. Already, debt levels in some countries are regarded by the IMF and the WBG as unsustainable, and, ominously, the IMF stated that “where we might be unable to lend because a country’s debt is unsustainable, we will look for solutions that can unlock financing”.

Even when CARICOM governments get past containment of COVID-19, which has not reached its peak, exceptional efforts will be required to stimulate their economy. However, unlike the wealthy countries of the world (the designation of high per capita income notwithstanding), Caribbean governments do not have myriad resources or tools on which to draw. More than likely, several of them will be forced to reduce the size of their public services and will be unable to provide support to private companies, including wage subsidies and tax holidays, and to the most vulnerable sectors of their populations.

Development in CARICOM countries, which has been hard won in the last few decades, could evaporate leaving the region unstable both economically and politically, and open to drug traffickers and transnational organized crime. The region could also be lost as a haven for democracy and peace, which has made it attractive as a holiday resort from people the world over and has also made its neighbors in the hemisphere much safer.

Read the full document:Reviewed-7Framework-Strategy-Document.

LEAVE A REPLY

Please enter your comment!
Please enter your name here