The United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC) has proposed debt relief for Caribbean countries on the part of multilateral credit institutions and the creation of a regional resilience fund.
ECLAC said on Monday that “this burden hinders the sub-region’s economic and social progress, as well as compliance with the (UN’s) Sustainable Development Goals (SDGs),” which will be approved in September at UN headquarters in New York.
ECLAC said the proposal was expected to be presented by its Executive Secretary, Alicia Bárcena, during the Third International Conference on Financing for Development, which began in Ethiopia on Tuesday and ends on Friday.
ECLAC recommends that the Caribbean Community and Common Market (CARICOM) reach an agreement with the Caribbean Development Bank (CDB), the World Bank and the International Monetary Fund (IMF) 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 CDB, ECLAC said.
It said the main goals would be to address natural disasters, finance climate-change adaptation and mitigation measurements, and boost social development.
In 2013, ECLAC said five Caribbean countries – Antigua and Barbuda, Barbados, Grenada, Jamaica and St. Kitts and Nevis – were among the 20 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 15 Caribbean countries amounted to US$46 billion, or 71 percent of sub-regional GDP.
According to ECLAC’s figures, the external public debt in seven countries with available and complete information – Belize, Dominica, Grenada, Guyana, Jamaica, St. Lucia and St. Vincent and the Grenadines – totals US$10.956 billion.
Of that amount, ECLAC said 40 percent is multilateral, and 14 percent is bilateral; while the rest (US$5.037 billion) is private debt that is publicly guaranteed.
ECLAC contended 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 stressed 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, ECLAC said 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 UN development agenda, ECLAC said.