Adequate fiscal space needed to plan for development

Prime Minister Mia Amor Mottley has identified adequate fiscal space to plan for development; a meaningful overhaul of the international financial architecture to create that space, and concessional financing for middle and upper middle-income countries, as some of the measures needed for these unusual times.

Ms. Mottley expressed this view today as she virtually addressed a high-level segment of the 68th Session of the Trade and Development Board, in Geneva, being held from June 21 to July 2. The theme is: Extraordinary times call for extraordinary measures: Preparatory meeting on the road to UNCTAD 15 and LDC5.

Describing the theme as ‘apt”, the Prime Minister said: “You ask me now what extraordinary measures do these extraordinary times require for countries like mine? I would simply say a little breathing room; a little breathing space; adequate fiscal space to plan for our own development, and a meaningful overhaul of the international financial architecture to create that space.

“I would also say that the granting of concessional financing for middle-income and upper middle-income countries who need it, is critical. Not because we have not done well in our development efforts, largely through our own efforts…, but because of the multi-dimensional vulnerabilities that we increasingly face, and the high cost of capital imposed upon us by the present simplistic categorisation, which effectively prevents us from dealing with vulnerabilities in a sustained way.”

Ms. Mottley insisted that the GDP per-capita criterion was an outdated and highly distorted measure, which did not reflect the fact that 70 per cent of the world’s poor lived in middle-income countries.

“Extraordinary measures must also include, therefore, a more sensitive approach to COVID-related debt against these facts. War debt was treated sensitively where Britain was concerned after the war. COVID-19 is our current war, and the funding of this war certainly deserves similar treatment,” she contended.

She noted that the countries most heavily impacted economically by the pandemic in 2020 were those highly dependent on tourism and travel and pointed out that they registered steep declines in real GDP.

The Prime Minister proffered the view that for the most seriously affected countries, their vital tourism sectors would only begin to recover when international travel safely recovers.

“But the appallingly inequitable distribution of vaccines makes it all the more difficult for most of us to create the conditions to stimulate inward travel while keeping our own populations safe. And while the recent gesture of the G7 is most welcome, I fear, truly, that some of us cannot survive until the end of 2022, not with the declines we had in 2020.

“So ultimately we find ourselves having to go through middle-men to source supplies at exorbitant prices which we can’t afford, but without which we cannot hope to kick-start our economies. We just simply have to find the money to buy vaccines at the higher level,” she stressed.

Ms. Mottley said COVID-19 had decimated economies and the burden had fallen disproportionately on the poor, vulnerable and disadvantaged in countries.

She expressed the view that the capacity for a prompt and sustained recovery seemed to be the purview of just a handful of the world’s wealthiest countries. The Prime Minister argued, however, that was not the type of world that was desired.

“Why? For the rest of us, the current realities we face in responding to COVID and other existential crises will simply exacerbate the inequalities and vulnerabilities that we already face, unless, there are systemic changes in the international financial architecture…,” she explained.

The 15th Session of the United Nations Conference on Trade and Development (UNCTAD 15), to be hosted by Barbados from October 3 to 8, is a virtual event. (BGIS)