ppt sea proposal for debt relief among caribbean sids moncom

A proposal for debt relief

among Caribbean SIDS

17th Meeting of the Monitoring Committee of the CDCC17th Meeting of the Monitoring Committee of the CDCC

among Caribbean SIDS

Antonio Prado

Deputy Executive Secretary

Emerging challenges

• Region has experienced lower GDP growth since

the post crisis period with an average of 1.2% in

2014.

• ECLAC projects that in 2015 growth will be 2.2% but


ECLAC projects that in 2015 growth will be 2.2% but

many countries will be in the 1% range.

• Low growth has generated high levels of

unemployment especially among young people.

• Fiscal challenges limit governments’ ability to

maintain social protection programs.

Low Growth and High

Unemployment

8

10

12

14

16

AVERAGE GDP GROWTH AND UNEMPLOYMENT FOR THE CARIBBEAN, 2005-2015

(Percentage)


-6

-4

-2

0

2

4

6

8

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Unemployment Growth rate

High debt levels and debt service

costs


costs

Debt service costs for Caribbean

economies are high CARIBBEAN DEBT BURDEN, 2013

(Percentl)

ATG

BRB

GRD

JAM

LCA40

50

60

70

To

tal

de

bt

serv

ice

pa

ym

en

t

(Pe

rce

nt

of

Go

ve

rnm

en

t re

ve

nu

e)


BHS

BLZ

DMA

GRD

KNA

LCA

VCTAverage

-10

0

10

20

30

0 5 10 15 20 25 30 35 40 45 50

To

tal

de

bt

serv

ice

pa

ym

en

t

(Pe

rce

nt

of

Go

ve

rnm

en

t re

ve

nu

e)

External debt service payments

(Percent of Exports of Goods and Services)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figuresNote: Size of bubble represent total public debt as a percent of GDP.

].

The levels and composition of public debt is

highly heterogeneous among Caribbean SIDS

TOTAL PUBLIC DEBT COMPOSITION, 2013

(Percentl)

64

53 3742

66

80

100

120

140

160


7262 69

60

36

1227

4022

51

1632

168

66

6750

3753

19

42 5

1922 4

0

20

40

60

Highly Indebted Moderately Indebted Less Indebted

Domestic External

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures

].

For Caribbean countries aggregated multilateral and

bilateral debt represent 40% and 14% of total external

debt

COMPOSITION OF TOTAL EXTERNAL DEBT, 2013

(Percentl)

70%

80%

90%

100%

EXTERNAL DEBT COMPOSITION 2013

(Percent)

PPG,

bilateral

14%

TOTAL EXTERNAL DEBT COMPOSITION 2013

(Percent)


0%

10%

20%

30%

40%

50%

60%

70%

BLZ DMA GRD GUY JAM LCA VCT

PPG, bilateral PPG, multilateral

PPG, private creditors

PPG,

multilateral

40%

PPG, private

creditors

46%


].

For Caribbean countries aggregated multilateral

and bilateral debt represent 40% and 14% of

total external debtBILATERAL AND MULTILATERAL CONCESSIONAL DEBT, 2013

(Percentl of external debt stock PPG)

60.0

70.0

80.0

90.0

100.0


0.0

10.0

20.0

30.0

40.0

50.0

BLZ DMA GRD GUY JAM LCA VCT

PPG, bilateral concessional (percent of External debt stock PPG)

PPG, multilateral concessional (percent of External debt stock PPG)


].

WHY SHOULD CARIBBEAN COUNTRIES

RECEIVE DEBT RELIEF?


The Debt problem in the

Caribbean is a regional problem

• The debt problem is regional and the

adjustments programs in place impact

negatively on regional trade and weaken the

motivation for integration.


motivation for integration.

• High debt also constrains domestic and

regional efforts to build economic resilience.

Why should Caribbean countries receive

debt relief? Five reasons

1. Given the debt burden, the fiscal adjustment

needed to achieve fiscal sustainability is very large

and unsustainable.

2. Caribbean’s debt problem was not created from


2. Caribbean’s debt problem was not created from

either policy missteps, excessive fiscal profligacy

or the international financial crisis but rather has

its roots in external shocks, compounded by the

inherent structural weaknesses and vulnerabilities

confronting Caribbean SIDS.

Why should Caribbean countries receive

debt relief?

3. Caribbean economies have limited access to concessional

external finance since they are defined as Middle Income

countries.

4. For Caribbean SIDS, current debt challenge will make it

difficult for them to address the demands of the SDGs.


difficult for them to address the demands of the SDGs.

5. High debt burdens, which on average have increased in the

wake of the crisis, also affect sovereign credit rating and

have led to higher sovereign risk premia in international

capital markets which mean higher borrowing costs for

Caribbean SIDS.

A DEBT PROPOSAL FOR THE CARIBBEAN


A debt proposal for the Caribbean

We propose a strategy of debt relief that would

create more fiscal space and help member

states can be constructed around two axes:

a) Forgiveness of multilateral concessional debt


a) Forgiveness of multilateral concessional debt

b) The creation of a resilience fund

Forgiveness of multilateral

concessional debt The multilateral debt relief proposal involves three actors: The

multilateral institutions, donor countries and small states

debtor countries.

ECLAC proposes that multilateral institutions gradually write


ECLAC proposes that multilateral institutions gradually write

off 100 percent of small states multilateral debt stock,

contingent on approval from donors. The forgiveness of

multilateral debt is meant to ease the burden on the liquidity

constraints, as well as address the potential solvency risk.

Forgiveness of multilateral

concessional debt

At the same time bilateral donors should be asked to

participate. More benefits can be had if the debt is

reduced at a considerable discount. ECLAC proposes

that countries benefitting from debt relief be

required to make annual payments of existing


required to make annual payments of existing

multilateral concessional debt service in local

currency into a Caribbean Resilience Fund over a

period of 10 years.

The creation of a Resilience Fund

The Caribbean Resilience Fund would be

managed by an institution such as the

Caribbean Development Bank. Caribbean

small states can access the Fund to finance


small states can access the Fund to finance

projects and activities that have been

deemed to be growth-promoting, poverty-

reducing or environmental-protecting.

The creation of a Resilience and

Stabilization Fund

The Fund will be targeted at resilience building

activities and eligibility would be based on the level of

indebtedness and liquidity constraints faced by

member states. These criteria would be developed in

concert with member states, the multilateral/bilateral


concert with member states, the multilateral/bilateral

creditors/donors and the managing institution. This

fund would have two components.

1.Caribbean resilience fund

2.A macroeconomic and stabilization fund


The resilience fund would focus on:

1. Disasters: This component will provide more certain

financial resources for disaster relief and disaster risk

reduction projects. It should be focused on the recovery of

economic activity as well as the reconstruction process


economic activity as well as the reconstruction process

after a disaster with emphasis on infrastructure projects

with disaster risk reduction elements. These resources

should be complementary to other initiatives in the region

such as the Caribbean Catastrophic Insurance Facility

(CCRIF)

The Creation of a Resilience Fund

Social development

2. Social development: Education, health, and public

safety and security are essential public goods for


safety and security are essential public goods for

which the governments of highly indebted

Caribbean small states have struggled to

adequately finance. Dedicating resources for these

areas would be vital to the attainment of

sustainable development in the Caribbean.


3. Climate change: This tranche will finance

infrastructure projects including climate

adaptation and mitigation measures. Given

the difficulties in accessing the Global


the difficulties in accessing the Global

climate change and other funds, this would

be a considerable benefit to Caribbean SIDS.

The macroeconomic and

stabilization fund

It would be a countercyclical fund for addressing negative

external shocks. It should be managed by a prestigious

Institution such as the Caribbean Development Bank. The fact

that the region is ineligible for financing to address such

shocks, forces member states to borrow at market rates. This


shocks, forces member states to borrow at market rates. This

Fund should provide mechanisms and financial instruments

that help countries under those conditions.

Concluding thoughts

• Caribbean member states recognise that the

SDG agenda must be theirs but they need

partnerships on the journey.

• Debt reduction will create a level playing


• Debt reduction will create a level playing

field for Caribbean SIDS to pursue the SDGs.

• The proposal derives from the principle of

shared but differential responsibility and

poses no systems risks to financial markets.

ppt sea proposal for debt relief among caribbean sids moncom

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