Billions of dollars in Caribbean people’s savings could be tapped in a creative way to build resilience in the region in the climate crisis, the Prime Minister suggested.
In addition to proposing the floating of special bonds, she has challenged regional officials to “deconstruct” current regimes as necessary in order to “reconstruct” them to ensure the region’s sustainability.
“We are living in unusual times and unusual times call for unusual action. That unusual action we have learned, requires the deconstruction and reconstruction of what it is necessary to serve our needs,” Mottley told a high-level insurance colloquium at Lloyd Erskine Sandiford Centre on Tuesday.
She proposed that the CARICOM Development Fund (CDF) issue “growth and development bonds” to Caribbean residents so nearly US$50 billion sitting in the commercial banking system could earn more than the current 0.2 per cent average rate of return.
Mottley said: “It is a pool of funds crying out for a larger and better rate of return.
“It is happening at the same time that our businesses and our governments, some prosperous some disadvantaged, need access to funding in order to be able to build out greater resilience and to adapt to the things they need to adapt to as a result of climatic events.
“If we can let the people of the region help us solve the problems by finding creative financial instruments such as growth and resilience bonds in which the people ‘s savings can attract a higher rate of return than 0.1 to .02 per cent it is currently attracting while at the same time providing a source of finance for governments at a time when most banks are risk averse then we would have solve part of the problem that we currently face.”
The Prime Minister said a part of her proposed ‘deconstruction and reconstruction’ could be an amendment to the CDF’s charter and for that institution to form a partnership with the Caribbean Development Bank (CDB).
Pointing to the rising cost of insurance, Mottley said the Caribbean did not have the luxury of time “nor process that is bound by concepts that are fixed into stone”, and therefore a practical solution was urgently needed.
She said she was gravely concerned about the high levels of uninsured and underinsured people in the region, adding that the concern was not only related to hurricanes but also earthquakes and flooding.
Mottley said: “The time has come for us to shape our own future in conjunction with those with whom we do business and with whom we develop a relationship and friendship with.”
Dr Justin Ram, the CDB’s Director of Economics, agreed that it was important for the region to raise concessional resources to help build resilience but called for regulatory changes.
He said: “The issue we have is that we don’t have a market.
“There is a market failure with respect to building resilience.
“If we look at traditional bond markets we understand why the interest rates of bonds are where they are because they are based on inflation expectations or credit ratings.”
He further explained: “For building resilience markets what we need to do is have the right regulatory and market conditions to allow the massive amounts of money we have in the banking sector, in the private finance sector to come into that market.
“So what we need is some type of regulatory environment that can provide investors with the information to help them manage vulnerability expectations.
“So just as we are able to manage inflation expectations through a central bank or credit rating agency, I think we need some type of a resilience credit rating agency that allows us as investors to understand what the risk that we are getting involve with if we are to put money forward for building resilience upfront.” [email protected]