The Caribbean Community (CARICOM) has been lobbying consistently for a reversal of the policy of graduation which sees some Member States denied access to concessionary development financing.
The policy which uses GDP (Gross Domestic Product) per capita as a major criterion sees their graduation to middle-income status and attracts commercial rates for development loans. According to CARICOM, this situation increases already high debt burdens in the Member States.
Guyana having graduated to an upper-middle income status in 2016, saw major concerns being raised with retaining concessionary terms available in international trade markets. Guyana’s re-classification by the World Bank came in July 2016 following the oil discoveries in the Stabroek Block.
In a statement on Friday, CARICOM said Secretary-General, Ambassador Irwin LaRocque met with President of the World Bank and the Executive Director of the International Monetary Fund (IMF) recently in Washington, where they expressed willingness to reassess the policy of GDP per capita attached to concessionary development financing.
LaRocque said the Banks are willing to work with CARICOM, but they cautioned that a final decision resided with the countries which sit on the boards. The lobbying for reassessment follows closely on the recent hurricane season which left a number of member states working to rebuild their nations.
Secretary-General LaRocque pointed out that “you borrow to build, it gets destroyed and then you have to borrow to build again when you have not yet paid off the first set of borrowing. That compounds the debt burden of our region.”
He further explained that “in a very, almost diabolical way, construction adds to your GDP. Your per capita income increases and our countries are labelled as middle income. Hence, they cannot access concessional development financing. It is a trap. The criteria of per capita income especially as low lying coastal states, such as ours in CARICOM, must be changed.”
The United States – in respect of renewable energy and natural disaster management – and Japan had signaled their willingness to support the Community’s position. Now, the Community is intensifying its advocacy to other third state partners, including Spain, which has membership on the board of Financial Institutions.
There is no way, he added, the economy of hurricane-ravaged countries could generate enough economic activities to reconstruct by themselves.
When hurricane Maria struck Dominica on 18 September 2017, the island had not yet fully recovered from the ravages of Tropical Storm Erika, which struck in 2015. The total damage and loss then were estimated at US$483 million, equivalent to 90 percent of Dominica’s Gross Domestic Product (GDP), according to a damage and impact assessment conducted in collaboration with the World Bank, United Nations, and other development partners. The cost of Maria’s damage is estimated at $1 billion US, 200% percent of GDP.
Hurricane Irma devastated Barbuda (the sister isle of Antigua and Barbuda), the British Virgin Islands, Turks and Caicos Islands, and Anguilla, as well as St. Marten and St. Barts. The islands of Barbuda, Tortola and Josh Van Dyke were left in ruins. Irma also caused significant damage in The Bahamas and Haiti and affected St. Kitts and Nevis. The US Virgin Islands, Puerto Rico and Cuba were also left reeling from hurricane damage.