In Turkey, where meetings of the IMF and the World Bank were held during the week of October 4th, Caribbean Finance Ministers raised with the First Deputy Managing Director of the International Monetary Fund, John Lipsky, their concerns about “the need for better representation and participation of small, developing countries in key meetings and fora such as the G20, where decisions that can significantly impact these small economies are frequently made”.
But, Caribbean representation in the already overcrowded G20 will not happen without a strong case being made and accepted by governments currently at the table. Similarly, much needed reform of the IMF and World Bank to benefit the Caribbean appears remote.
At the Bank/Fund meetings, the President of Guyana, Bharat Jagdeo, as current Chairman of CARICOM, led a team of Prime Ministers from the Bahamas, Barbados and St Lucia to make a case to the President of the World Bank, Robert Zoellick, that special attention should be paid to relieving and restructuring the debt of the highly indebted, vulnerable, middle income countries of the region.
And, Barbados Prime Minister, David Thompson, speaking at the formal meeting was emphatic that “limited access to World Bank funding has forced many middle income Caribbean countries to borrow in the private capital markets at substantially higher rates and shorter repayment terms”. Mr Thompson recommended that “further consideration be given to this issue of access by middle income countries to financing from the multilateral financial institutions.”
All of this is right. The entire Caribbean region is facing a serious reversal of its economic and social progress arising from a number of factors. It is true that one of the significant factors is poor economic management and decision-making by some of their governments, and this is a concern that Caribbean countries must themselves address.
The external factors are also real. Not least among them is the point raised by both Jagdeo and Thompson that the classification of Caribbean states as middle-income countries disqualifies them from concessionary financing from the international financial institutions and forces them into the commercial market for borrowing.
But, is anyone really listening? The moment for effective reform of international institutions is fast receding. Those industrialised nations that pledged themselves to reform in the wake of last year’s financial crisis are quickly retreating from their pledges as their economies begin to pick-up. The creation of the G20 and the provision of some additional resources to the IMF appear now to be the most they will do.
The new resources for the IMF are insufficient and, in any case, are not targeted to middle income countries such as those in the Caribbean; they are focussed on low income countries and on bigger countries such as those in Europe and Mexico.
A so called Flexible Credit Line has been introduced by the IMF “for countries with very strong fundamentals, policies, and track records of policy implementation”. Caribbean countries will not qualify for among the criteria are: a track record of steady sovereign access to international capital markets at favourable terms, and sound public finances including a sustainable public debt position.
Why these criteria should be relevant instead of ones that recognise the need to stimulate stagnant economies and provide support for social welfare programmes speaks to the anachronistic role of the IMF which still operates as an agency of the victors of World War 11, despite all the rhetoric.
As for the World Bank, the Turkey meeting deferred any increase in its capital until next year. Therefore, the Bank is faced with a limited lending capacity, and in this scenario, countries such as those in the Caribbean that are designated middle-income are not a priority.
Caribbean Heads of Government and Finance Ministers raising their concerns with Heads of the International Financial Institutions and in the formal sessions of the Bank/Fund meetings was absolutely right. They do not get much chance to do so, Caribbean countries have no seat of their own on the Boards of these bodies where they are represented by Canada. And, while Canada may be a sympathetic ally, there is no substitute for authentic argument from high representatives of Caribbean countries themselves.
In this connection, the prospect of any reform of the international financial institutions that would benefit the Caribbean in terms both of representation at the highest levels and change in IMF conditionalites and World Bank criteria for concessionary financing, does not appear to be on the cards anytime soon.
This is why Caribbean countries should adopt a collective and cohesive approach to this issue devoting resources to a joint and continuous diplomatic effort to put their case forcefully to the international community at every opportunity.
It is well within the region’s capacity to establish a task force of public sector and private sector professionals, under the umbrella of a special unit of the CARICOM Secretariat, to undertake this task. The task force could be mandated to produce documentation with all the necessary rigour for presentation to the Boards of the International Financial Institutions and to influential governments. Much of this work has already been done by a group established last year under Caribbean Development Bank President, Compton Bourne.
In turn, high regional representatives led by one or other of available Heads of Government could be appointed to engage the international community in an intense campaign on the basis of a well-debated and agreed CARICOM strategy.
The Commonwealth Heads of Government Conference in Trinidad in November presents a unique opportunity to make the Caribbean case to five Heads of Government of G20 countries – Australia, Britain, Canada, India and South Africa. They may not get far with Australia and Britain, but India and South Africa with whom they have close links, and Canada with whom they share a common neighbourhood should listen.
The Commonwealth Secretariat has itself done a great deal of work on small states and reform of International Financial Institutions. The November Commonwealth Summit, therefore, is an excellent forum for the Caribbean to advance a cohesive campaign.
October 9, 2009
caribbeannetnews
