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The Caribbean Community (CARICOM) will need the support of International Financial Institutions (IFIs), as it seeks relief for debt-burdened member states, in the face of the global financial crisis.
President of the Co-operative Republic of Guyana, His Excellency Bharrat Jagdeo, told journalists at Jamaica House on Monday (August 3), that there is a clear need for urgent financing for many CARICOM states to avoid a catastrophic situation.
Mr. Jagdeo, who is in the island on a working visit, was speaking in his capacity as Chair of a special Prime Ministerial Task Force, which includes Jamaica’s Prime Minister, the Hon. Bruce Golding, set up by CARICOM to craft appropriate responses to the impact of the crisis on the region.
Members of the Task Force, excluding Prime Minister of St. Vincent and the Grenadines, Ralph Gonsalves, met in Jamaica today (August 3).
“We are not seeking a write off, at this time, to a specific amount of debt. What we are seeking to do is to get these institutions, in principle, to agree that middle income countries of a particular kind, and those can be found in our region, where they have specific vulnerabilities, that they should be eligible for multilateral debt relief,” the Guyanese President said.
“They must also be eligible for financing, so they can refinance some of the high cost, short term debt,” Mr. Jagdeo added.
The Task Force has completed a dossier on each country, outlining the gaps that exist in each and where they plan to seek their solutions.
Mr. Jagdeo said the task force recognises that there is need for immediate action, and that most countries will have to seek multilateral assistance, including the International Monetary Fund (IMF), as the level of resources needed does not exist in the region.
“If they do not, then the situation will get significantly worse. They will face serious balance of payment difficulties, they will have to run down reserves, (there would be) exchange rate depreciation and, to fight that, most countries will have to push up interest rates,” he cautioned.
“One way of avoiding this, is going to the multilateral institutions to get some assistance to fill the gap from a fiscal perspective, and also balance of payment,” he outlined.
He said most states have already indicated that they will be seeking some kind of programme with the multilaterals. He noted that action has to be taken to stem the debt overhang in the medium term.
“For the medium term to be sustainable, something has to be done about the huge amount of resources extracted out of our economy to service the debt. Without us being able to address this situation, which is grave for many countries in the region, the prospect of having a sustainable medium-term framework looks dim at this point in time,” he stated.
The Task Force has agreed that a group of Heads will meet with the Heads of the multilateral financial institutions, to argue the case of middle income countries to be eligible for multilateral debt relief. The group of Heads will advocate for sufficient resources to refinance some of the debt that some member states have already contracted on commercial terms, or with high interest rates.
He said that there has been agreement to approach several countries, because to secure the support of the multilateral agencies would require political support from countries that are critical in the decision-making process at the level of the boards of the institutions, including China, the United Kingston and the United States.
CARICOM Heads will begin meeting with multilateral Heads by September. Mr. Jagdeo said that it is hoped to put the issue on the table at the annual meeting of the International Monetary Fund (IMF) and World Bank in October.
The Commonwealth Heads of Government meeting in Trinidad and Tobago, in November, will also be critical in garnering support for CARICOM’s position.