WASHINGTON, 14 June 2022 /PRNewswire Policy/ — Nearly seven decades ago, famed Barbadian novelist George Lamming, who sadly passed away recently, wrote that, “The architecture of our future is not only unfinished; the scaffolding has hardly gone up.” Now, as we celebrate his life, the people of Barbados, and the entire Caribbean, are once again putting in place the economic scaffolding to support building a more inclusive and resilient future.
This work goes on as the region, and the world, face the most difficult economic challenges since Lamming wrote those words. Caribbean economies were especially hard hit by the pandemic and lockdowns, contracting three times as much as the rest of the world in 2020.
While tourism remains below pre-COVID levels for most countries, it is on the rebound and gaining momentum. And we expect the region to grow by about 3.7 percent this year.
Still, there are big hurdles to overcome now and to build resilience for the future. Higher global food and fuel prices, exacerbated by the war in Ukraine, are putting upward pressure on inflation—stretching household budgets already stressed by the pandemic.
For most countries in the region, government debt is elevated, due in part to spending that was vital to the pandemic response—and tightening global financial conditions will increase the costs of servicing current debt, as well as in acquiring new financing.
Above all Caribbean countries must contend with the significant threat from climate change: more frequent and intense natural disasters, and the relentless rise in sea levels.
Building a more resilient future will not be easy in these circumstances, but the right policies—the right economic ‘scaffolding'—helps. Looking around the region, it's encouraging to see how countries are doing just that.
I am keen to hear that regional perspective during my visit to Barbados this week, from Prime Minister Mia Mottley and Barbadian officials, from the people of Barbados directly, especially young people, as well as from policymakers from across the Caribbean, who will also join our discussions in Bridgetown.
Together we can define the right economic policies that can tame inflation, protect the most vulnerable, address debt, and fight climate change—so as to reinforce the economic recovery, and build resilience to future shocks.
Governments should target support to families in need by strengthening the adequacy and efficiency of social assistance. Take Grenada for instance, where they scaled up cash transfers through their main social assistance program to ensure households were adequately compensated for increased living costs. Programs like this provide better support than measures like price controls on imported products, while conserving limited fiscal resources. Upgrading COVID-19 testing and reducing vaccine hesitancy will strengthen health systems and give tourists the confidence to return.
Central banks in the region also have an important role. Like their counterparts around the world, those with independent monetary policy should act decisively to address inflation and communicate clearly.
Tightening global financial conditions will also require added vigilance to preserve financial stability in the region, especially as debt suspension programs from earlier in the pandemic expire.
And, looming above all else is the need to adapt to climate change to secure a better future. Disaster resilience strategies—like those developed in Dominica and Grenada—help countries incorporate climate risks and adaptation plans into their budgets and into their infrastructure investments.
In designing and building the architecture of the Caribbean's future, the IMF is a committed partner.
Our Caribbean Technical Assistance Center in Bridgetown is a powerful symbol of that partnership, as it celebrates 20 years of delivering technical assistance and training to help governments across the region.
We also partner through financial support. Barbados is an excellent example. With the help of an IMF-supported program since 2018, the government stabilized and was able to effectively deploy macroeconomic policies to counter the pandemic and support vulnerable people. Similarly, Jamaica and Grenada restored stability and reduced debt through IMF-supported programs before the pandemic, also better positioning them to respond to the COVID-19 crisis. And the recent IMF-supported program to restore macroeconomic stability in Suriname is off to a strong start.
We're also working to adapt our lending to meet countries' evolving needs. The IMF's new Resilience and Sustainability Trust is a prime example and is thanks, in no small part, to Prime Minister Mottley's strong and consistent advocacy.
By providing affordable, longer-term financing, the RST is designed to help countries address structural challenges—like climate change and pandemics—and in turn build resilience to external shocks and ensure sustainable growth. All Caribbean IMF member countries are eligible for the RST, including countries in the region that have previously not had access to concessional IMF financing. It will also catalyze financing from international financial institutions and the private sector.
Mobilizing climate financing—and safeguarding debt sustainability affected by climate-related and natural disasters—requires a more comprehensive financial framework, including novel financing solutions. For instance, Belize recently agreed to specific marine protections in exchange for a reduction in its international debt to private bondholders—a “debt-for-nature swap” that also could be part of the solution for other countries.
Also, for countries at risk of large natural disasters, contract clauses that allow for delayed debt repayment when disaster strikes—such as those introduced by Barbados and Grenada during public debt restructurings—are a promising way to shore up financial resilience.
With natural beauty, the resilience and resourcefulness of its people—especially young people—and international partnerships, the Caribbean is well placed to build on its progress with an even better architecture for the future.
Op-Ed published in The Nation, Jamaica Observer, and Caribbean Media Corporation (CMC).
SOURCE International Monetary Fund (IMF)