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Debt relief and concessionary financing – key to economic recovery, says CARICOM leaders

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Posted: Sunday, November 1, 2020. 9:17 pm CST.

By Aaron Humes: Debt relief and access to concessionary financing are key to the economic recovery of the region according to CARICOM’s Heads of Government. The Heads met virtually, and are planning the road back from the COVID-19 pandemic, which they agree has exacerbated the development challenges already confronting the Community to a deeper extent than other regions, exposing a public health crisis, an economic crisis and a deepening debt crisis.

The Heads of Government noted that “the economic prospects for the Caribbean had worsened and cited a report by the International Monetary Fund that the Caribbean is the most affected globally by this pandemic, given that it is the most tourism and travel dependent Region in the world”. The pandemic would exacerbate already high deficits and debt in many countries in the Region and building back would have significant capital requirements which required a multi-faceted financing plan.

The Government leaders called for a new Special Drawing Rights (SDR) allocation by the International Monetary Fund’s (IMF) as well as the refinancing of COVID-related debt into long-term low-interest instruments.  They also urged the early development and use of a Universal Vulnerability Index to determine countries’ eligibility for development assistance. In a short meeting held with the United Nations Secretary General, the CARICOM leaders “welcomed the Secretary General’s firm support for the need for urgent debt relief for middle-income developing countries”.

Heads of Government also agreed to designate the CARICOM Private Sector Organization (CPSO) as an Associate Institution of the Community and establish a Memorandum of Understanding between the Caribbean Community and CPSO Inc. for cooperation towards the further implementation of the CARICOM Single Market and Economy (CSME). 

A Caribbean Economic Recovery and Transformation (CERT) Plan devised by a regional team of experts under the leadership of the Prime Minister of Barbados, Mia Amor Mottley received the blessing of the regional leaders.

Since the start of the pandemic Belize has borrowed in excess of $350 million, some locally and some in foreign currency. Treasure notes to the tune of $75 million was launched in April, and on 30 September 2020, the government raised the ceiling for treasury notes that can be borrowed locally by $200 million primarily to meet the unsustainable public sector wage bill. There was also the launch of a US$30 treasury note in June this year, in addition to a number of restructured and new debt from international financial institutions such as the Inter-American Development Bank (IDB) and the Caribbean Development Bank (CDB). Belize’s debt to GDP ratio is now in excess of 130%. Outgoing Prime Minister Dean Barrow has already signaled that a future Government will have to heavily pursue a further restructuring of the Superbond and other debts, while raising the likelihood of retrenchment in the public service despite whoever wins the November 2020 elections. 

 

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