The Economic Commission for Latin American and the Caribbean (ECLAC) has called for the creation of a Caribbean Resilience Fund as part of a debt alleviation strategy based on a climate change swap proposal.
“The swap will involve the use of pledged climate funds to write down the public debt of Caribbean countries and create the financing necessary to fund climate change adaptation and mitigation initiatives and investment in green economies, which in turn will be administered through a Caribbean Resilience Fund,” said Alicia Bárcena, ECLAC’s executive secretary, during the fourth meeting of the Caribbean Development Roundtable (CDR), held here on Thursday.
ECLAC said on Friday that the proposal “stems from the recognition” that Caribbean countries are among the most highly indebted countries in the world.
ECLAC said the sub-region’s high debt dilemma is linked to external shocks, compounded by the inherent structural weaknesses and vulnerabilities confronting Caribbean Small Island Developing States (SIDS), with limited capacity to respond. Many Caribbean countries belong to the middle income category, which constraints their access to concessionary funding.
In addressing government officials and representatives of numerous regional and international organizations during the opening of the CDR, Bárcena detailed a strategy for the growth and economic transformation of Caribbean economies in light of the heavy debt burden.
Bárcena said resources from the Green Climate Fund (GCF) could be used to write down Caribbean public debt from multilateral and bilateral lenders, and buy back debt from private creditors at a steep discount.
“With the newly-found fiscal space, Caribbean governments would then make payments into the Caribbean Resilience Fund, which would in turn be used to finance resilience capacity-building in climate change mitigation and adaptation, and invest in green economies,” ECLAC said.
It said its debt for climate adaptation swaps proposal calls for donors to use pledged resources from the (GCF) to finance a gradual write down of 100 per cent of the Caribbean SIDS multilateral debt stock held at various multilateral institutions, as well as the bilateral debt stock of Member States.
In responding to Bárcena’s presentation, Vance Amory, premier of Nevis, minister of Finance, Nevis Island Administration and acting prime minister of St. Kitts and Nevis, affirmed that “one cannot downplay the potential negative impact of climate change on our fragile economies and our ability to provide future economic growth.”
In this nexus, Amory underscored that “we have to put together a cohesive approach so that we can have the desired response to the need to pay our debt”.
Discussions during the CDR also focused on prospects for pursuing the achievement of the Sustainable Development Goals (SDGs) in the Caribbean, ECLAC said.
Bárcena stressed that the current debt overhang and environment of fiscal constraint make it “almost impossible for Caribbean governments to make the desired public sector investment in green industries, which would stimulate growth and promote economic transformation in the Caribbean.”
She said the debt for climate swap proposal is aimed at creating the fiscal space for such public investment.
ECLAC said delegates at the Roundtable highlighted a number of “critical issues” that they said increased the vulnerability of Caribbean SIDS, notably climate change and a range of social challenges.
These challenges included population ageing, non-communicable diseases (NCDs), the persistence of poverty and inequality, high youth unemployment, the loss of skills through emigration, and low technological capacity.
Delegates affirmed that these concerns “would have to be addressed through SDG implementation,” according to ECLAC.