The Economic Commission for Latin America and the Caribbean (ECLAC) proposes debt relief for Caribbean countries on the part of multilateral credit institutions and the creation of a regional resilience fund, considering that this burden hinders the subregion’s economic and social progress as well as compliance with the Sustainable Development Goals (SDGs), which will be approved in September in New York.
This proposal will be made by ECLAC’s Executive Secretary, Alicia Bárcena, during the Third International Conference on Financing for Development, which will be held July 13-16 in Ethiopia.
ECLAC recommends that the Caribbean Community and Common Market (CARICOM) reach an agreement with the Caribbean Development Bank, the World Bank and the International Monetary Fund to achieve a gradual write-off of total multilateral external public debt, since those funds were earmarked to finance recovery measures after the impact of natural disasters between 1990 and 2014.
In return, the beneficiary countries should make annual payments to a Caribbean resilience fund that could be managed by the Caribbean Development Bank and the main goals of which would be to address natural disasters, finance climate-change adaptation and mitigation measurements, and boost social development.
In 2013, five Caribbean countries (Antigua and Barbuda, Barbados, Grenada, Jamaica and Saint Kitts and Nevis) were among the twenty most indebted countries in the world, according to the ratio of their public debt to their Gross Domestic Product (GDP). That year, the total debt burden, both internal and external, of fifteen Caribbean countries amounted to 46 billion dollars, or 71% of subregional GDP.
According to ECLAC’s figures, the external public debt in seven countries with available and complete information (Belize, Dominica, Grenada, Guyana, Jamaica, Saint Lucia and Saint Vincent and the Grenadines) totals 10.956 billion dollars. Of that amount, 40% is multilateral and 14% is bilateral, while the rest (5.037 billion dollars) is private debt that is publicly guaranteed.
ECLAC contends that the tax adjustments needed to reduce debt to sustainable levels would be so tough that they would put countries into recession. Additionally, the organization stresses that this debt has not been the result of political errors, poor fiscal management or the global financial crisis, but rather stems from external shocks, aggravated by the inherent vulnerability affecting the Small Island Developing States (SIDS) of the Caribbean, and the decline in foreign direct investments in recent decades.
Additionally, Caribbean countries, which are considered to be middle-income, have limited access to external loans with favorable conditions, which forces them to resort to commercial sources of financing that increase their debt burden. Furthermore, all of this will limit their capacity to implement the post-2015 development agenda.