Private sector, economic integration key to Caribbean growth

Bahamas Prime Minister and Minister of Finance, Perry Christie.
AP Photo/Tim Aylen, file
AP Photo/Tim Aylen; file

The International Monetary Fund (IMF) says that private sector, economic integration and continued reform are “key” to restoring growth in the Caribbean.

“Macroeconomic stability and sustainability are vital prerequisites for growth. Given the need for countries with high debt to reduce their fiscal and external imbalances, the private sector must take a lead role in investment and growth,” said the Washington-based financial institution in a statement.

“The Caribbean has inherent strengths and comparative advantages in key sectors that have not been fully exploited and that hold considerable potential as sources of economic growth in the near term,” it added.

The statement comes on the heels of the just-concluded 2013 High Level Caribbean Forum, “Building Growth into the Caribbean Sustainability Agenda,” in Nassau, Bahamas.

At the conference, high-level Caribbean officials and representatives from international and regional financial institutions stressed the importance of private-sector led activity, furthering economic integration and continued efforts in structural reforms to kick-start growth in the region.

The forum, a follow-up to the 2012 conference in Trinidad and Tobago on rethinking policy priorities, brought together policymakers and officials from the region.

Hosted by the government of the Bahamas, the conference was convened by the IMF in collaboration with the Caribbean Development Bank (CDB), the Inter-American Development Bank (IDB), the International Finance Corporation (IFC) and the World Bank.

“The theme of this year’s conference is a direct response to feedback at the 2012 Forum where policymakers underscored the need for renewed growth as the necessary anchor to a viable future and to fiscal sustainability,” noted Alejandro Werner, director of the Western Hemisphere Department at the IMF.

Werner said the forum also responded to the request of Caribbean authorities for international financial institutions (IFIs) and other development partners to collaborate and ensure consistent policy advice, “so as to forge a coherent, holistic approach to reviving growth.”

The IMF said the first priority for policymakers is to implement measures to enhance the business environment, such as reducing bureaucratic processes, and lower costs.

“Public private partnerships (PPPs) can play a role in raising much needed investment and funding of infrastructure projects,” it said.

“While the political will exists, the region will need more information on cost and benefits of PPPs, in some cases reforms to the legal frameworks, and greater effort to build consensus among key stakeholders and the public,” it added.

“The end goal should be to achieve the best risk sharing between public sector balance sheets and the private sector,” it continued.

The IMF said reforms to the labor market hold “considerable potential,” stating that research has showed that “removing rigidities to wage-setting could have important positive effects on employment and growth.

“Aligning wages better with productivity and strengthening incentives to improve skills matches are key priorities,” it said.

The IMF said a key element in the path forward is to strengthen integration to help share and lower fixed costs, and to increase trade integration.

“Indeed, many of the challenges facing Caribbean countries are better suited to regional solutions, such as customs and VAT (value added tax) reforms, regulations for PPPs, information and communication technology (ICT) infrastructure, and aviation policies,” it said.

“The IMF, together with its sister institutions, is committed to working with member governments on many of these constructive ideas,” it added.

As expressed by the Bahamas Prime Minister and Minister of Finance, Perry Christie, “the IFIs and the IMF need to be flexible in their surveillance and lending operations with small states given their special characteristics and needs.”

In, this regard, IMF Deputy Managing Director Nemat Shafik reiterated that the Washington-based financial institution is pursuing analysis and policy work “tailored specifically to the needs of small states.”

He said IMF staff will work with small states to “ensure more focus on growth” in their Fund-supported programs.

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