Trust the Chinese a little more

Caribbean Governments have been told to get over their hang-ups about borrowing money from China.

Dr Don Marshall, head of the Sir Arthur Lewis Institute for Social and Economic Studies (SALISES) at the Cave Hill Campus of the University of the West Indies (UWI) says China’s lending conditions are no more onerous than traditional lender nations or institutions such as the World Bank or the International Monetary Fund (IMF).

Speaking at a recent SALISES Mona Campus-led discussion entitled Covid-19 and Fiscal Sustainability – Debt, Balance of Payment and Financing For Development, Marshall said too many Caribbean leaders were overly suspicious of borrowing from the Chinese at a time when and it was one of the leading providers of foreign direct investment to more than 100 countries.

He argued that as regional Governments seek funding to prop up their economies that have been shattered by the effects of the global pandemic, he noted: “The IMF recognises China as well as its digital currency.

“The post-Cold War hang up that we in the Caribbean and elsewhere seem to have that suggests to us that we ought to look to China . . . with suspicion while treating to traditional creditor nations in the West with open arms, we need to get away from that.”

The UWI academic added: “We need to access financing on concessional terms and not just complain about the narrow GDP criteria used . . . on the part of the Paris Club to determine which countries will benefit from concessional loans and which by dint of being called middle-income countries have to go the capital markets and borrow expensively.

“I am saying in this COVID-19 moment we are crossing the Rubicon. Global lending today is about patient capital, patient lending. It is about avoiding the volatility of the capital markets and it is an end to the game of performing for the credit rating agencies, only to pass [their] fiscal consolidation Litmus tests.”

The SALISES Cave Hill head said the current economic environment demanded a higher level of state intervention to stabilize the economy in the face of the global shock caused by COVID-19.

He added: “We in the region have to be insisting and lobbying . . .  to encourage greater flexible financing. The IMF, China and other creditor nations and international lending institutions should agree to new forms and flexible financing.”