The Debt Swap initiative, which was first presented at ECLAC’s Caribbean Development Roundtable in Saint Kitts and Nevis early in 2016,is a mechanism intended to address at once the crippling debt of the Caribbean and their need to generate the resources needed to finance resilience building measures. It is an innovative strategy that involves harnessing concessionary flows to transform the debt of the region into a source of investment in resilience, while at the same time re-energizing growth and promoting economic transformation in the economies of the subregion, through investment in adaptation projects and green industries.
The Debt Swap task force was inaugurated at a meeting held in Port of Spain, Trinidad and Tobago on 24 November 2017.The meeting provided a forum for avid discussion among a group of key Caribbean institutions including the CARICOM Secretariat, the Organization of Eastern Caribbean States, the CARICOM Development Fund, the Eastern Caribbean Central Bank, as well as representatives from national institutions like the Planning Institute of Jamaica.
ECLAC Caribbean Director, Diane Quarless, stressed that the devastating impact of the recent superstorms on many countries in the Caribbean demonstrated the premise of the ECLAC initiative that the high debt of the subregion is to a significant measure the result of the vulnerability of Caribbean countries to extreme climatic events. The high levels of debt in Caribbean countries, many with debt to GDP ratios in excess of 70%, the level considered unsustainable, has substantially narrowed the governments’ fiscal space, stifling opportunities for investment and growth.
Participants sought clarification on the mechanics of the debt swap arrangement, examining closely the likely impact on various stakeholders, and exploring the feasibility of pursuing economic diversification with a view to producing competitive exports that generate foreign exchange and stimulate growth in the economy. Consideration was given to the need to develop a portfolio of green projects and strategies to capitalize the Caribbean Resilience Fund which should serve as the source of financing.
Challenges in addressing domestic debt were also raised. Participants also highlighted that it may be more beneficial to focus on the multilateral debt in the first instance, since securing haircuts on the debt from private creditors might be less easy to sell. It was agreed that the launch of this ambitious project should be supported by an aggressive advocacy strategy to popularise the advantages of the debt swap initiative.