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BEHIND THE HEADLINES: The case for a Caribbean debt initiative


TONY BEST

BEHIND THE HEADLINES: The case for a Caribbean debt initiative

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There are some things we know about the English-speaking Caribbean.

One is that its topography is magnificent. Another is that the islands and coastal territories have successfully invested billions of dollars in the education and health of their people in the past half century, so much so that they have earned relatively high rankings on the United Nations Human Development Index.

And as a leading vehicle for upward economic and social mobility, the University of the West Indies in Jamaica, Barbados and Trinidad and Tobago can take much of the credit for that enviable track record. 

Next: the financing needs of the middle income countries throughout the archipelago are routinely left twisting slowly in the wind because they are sandwiched between industrialized states and the poorest of the poor around the globe. 

There is more, much more, we know about the Caribbean. The area accounts for some of the most heavily indebted nations on earth. Jamaica, St Kitts-Nevis, Barbados, St Lucia and Antigua & Barbuda are routinely listed among the top 30 developing economies with the highest mountains of debt. That makes them well-placed to present a credible plan to the international community to help developing lands deal with the debt nightmare.

That’s exactly what Jamaica did recently when Prime Minister Andrew Holness addressed the United Nations (UN) General Assembly.

Holness called his country’s plan the highly indebted middle income countries (HIMIC) initiative which, among other things, seeks to relieve them of much of the heavy burden of foreign and domestic debt.

Interestingly, Jamaica isn’t seeking debt forgiveness. Instead, it has presented a carefully designed scheme that would boost investment, encourage trade, promote transfers of technology and emphasize the use of clean energy, all aimed at spurring economic expansion.

The initiative deserves early and careful study by international development institutions, the G-20 and others that have a mandate and resources to help countries which pay their debts, something Jamaica and Barbados have done. Unfortunately, though, Barbados owes the UWI $200 million which the country has so far declined to pay. It should do so.

This much is clear about HIMIC plan. It would, if implemented, fill a gaping void left by the rich states and the World Bank and International Monetary Fund which introduced the heavily indebted poor countries initiative, HIPIC, two decades ago to ensure that “no poor country faces a debt burden it cannot manage”. 

Clearly, the need for an international plan to help middle income countries is undeniable and it was left to Holness to put their case.

The Jamaica PM issued a dire warning: “In a climate of historically low economic growth, if nothing was done, the HIMIC could suffer a diminution in their relatively high levels of health and educational attainment and that should be avoided like the plague. Their debt profiles are forcing most of them to choose between debt repayment and catalytic growth spending.”

According to data compiled by a range of national and global  bodies including the United States Central Intelligence Agency, the World Bank, the International Monetary Fund, Forbes and Richest.com, Jamaica’s debt amounts to about 130 per cent of the gross domestic product. St Kitts-Nevis’ is also much larger than the total output while Barbados’ level was pegged recently at about 101 per cent of GDP. Antigua’s pile of debt fell in recent times after it turned to the IMF for help but it stands in the vicinity of 80 to 90 per cent of GDP.

The trouble is that the economies of many of these countries are expanding at a snail’s pace, if at all. They are averaging between one to three per cent growth while debt levels are galloping, some by as much as five or six per cent annually. 

But that’s not the whole, sad story. With the World Bank, the IMF and the United Nations Development Programme using per capita income GDP figures to determine which countries are eligible to receive or are denied development assistance, many Caribbean states are being starved of financing on concessional terms. That’s unfair.

“The unilateral and unidimensional graduation policies of international development agencies which penalise us for progress in human development, while ignoring our obvious vulnerabilities” are obvious issues which Senator Maxine McLean, Barbados’ Foreign Minister said should be tackled.

Holness put it another way.

“The problem is that while GDP per capita gives an indication of average income, it says nothing about the stack of wealth a country possesses nor does it take into account the vulnerabilities a country faces,” asserted the prime minister.

Hurricanes and storms, including Matthew which briefly threatened Barbados, St Vincent and Jamaica but hit Haiti, The Bahamas and Cuba are among the “vulnerabilities” Holness, Bahamas Foreign Minister Fred Mitchell and Timothy Harris, St Kitts-Nevis’ leader hadin mind.

But tying the plan to a fiscal stabilisation agreement with the IMF and the World Bank is unlikely to sit well with many developing nations, Barbados among them, which believe the Fund inflicts too much pain on states when they turn to it for help.  

That’s why institutions like the World Bank, IMF and the Inter-American Development Bank should review the initiative and act on it. They should also consider Antigua’s proposal as outlined by Prime Minister Gaston Browne, who proposed debt swaps for climate change adaptation and mitigation.

With these plans on the table, the international community has a real chance to aid countries which were left out of the development financing loop for years.

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