International Monetary Fund (IMF) Caribbean Member Countries are being encouraged to lead take-up of the institution’s multibillion-dollar Resilience and Sustainability Trust (RST).
The RST is aimed at helping countries build resilience against external shocks and ensure sustainable growth, contributing to their long-term balance of payments stability.
Managing Director, Kristalina Georgieva, said that Caribbean countries are ideally positioned to tap into the facility based on their response to weather and health-related shocks and crises, including the coronavirus (COVID-19) pandemic.
She noted that several countries have taken decisive action over the last several years to build strong capacity to buffer themselves against these shocks, citing Jamaica and Barbados as examples.
“The lesson from this to everyone [is] to do as much as you can to build that economic financial resilience. I appeal to you, the Caribbean, [to] lead the way [in tapping into the RST],” the Managing Director urged.
She was speaking during an IMF High-Level Panel Discission on ‘Building Resilience and Sustainability in the Caribbean’, in Bridgetown, Barbados on June 17.
Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, moderated the event, which featured presentations by host Prime Minister, Hon. Mia Mottley, and Canada’s Deputy Prime Minister and Minister of Finance, Hon. Chrystia Freeland.
Ms. Georgieva said Caribbean countries are particularly vulnerable to climate change, noting that they are “smaller economies with less diversity of response capacity, as a result”.
She pointed out, however, that she was impressed with the strength of the people across the region, citing their ability to “help each other [to] recover quickly when a shock comes”, adding that “together, you are stronger”.
Consequently, the Managing Director said it was an opportune time for stakeholder engagement on interventions such as the RST.
“Why? Because we are experiencing crisis upon crisis, and here [in the Caribbean] because of climate shocks there could be even more to come. What is very clear from the last two years, if it wasn’t clear to us before, is that we do live in a more shock-prone world, and shocks very rapidly go around the world,” the Managing Director added.
She expressed the hope that the IMF would figure in the individual and collective thrust by countries in the Caribbean and other regions “to be stronger for the future”.
The RST instrument is the first being offered by IMF that recognises vulnerability as a criterion for concessional financing.
It is intended to enable vulnerable low- and middle-income IMF Member Countries accessing funding to bolster climate-change adaptation and strengthen resilience through structural transformation, thereby mitigating the debilitating impact of weather-related crises and safeguarding their natural resources and populations.
The institution is looking to provide a minimum of US$45 billion in long-term concessionary loans, beginning October.
A total of US$40 billion has, to date, been committed by IMF Member Countries with strong reserve positions, who are making the allocations from the Special Drawing Rights (SDR) with the institution.
Among them is Canada, which represents the Caribbean on the IMF’s Executive Board and is providing the equivalent of US$2.44 billion.
Loans for each beneficiary country will span 20 years, with a moratorium on repayments for the first 10 and a half years.
“We realise that if we are to incentivise our members to undertake structural reforms that would make them more resilient, we have to [provide] a longer timeline than [what obtains with] our traditional lending [arrangements],” Ms. Georgieva said.
She noted that while the process of structural transformation to bolster climate change adaptation and resilience “needs to be funded upfront”, the anticipated positive outcomes would materialise “over time”.
Ms. Georgieva underscored that the goal “is to prevent Balance of Payments shocks in the future, and that is strictly within the mandate of the IMF”.