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CDB head acknowledges that countries appear to be penalised for ‘graduating’

by Marlon Madden
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Barbados is getting the backing of the Caribbean Development Bank (CDB) in its call for a change in the method used by development finance institutions in determining whether a country qualifies for concessional finance.

President of the CDB Dr Gene Leon said the current system was being used “to the detriment” of the region and other developing states, which are constantly faced with a range of challenges even when their wealth improves from time to time.

Currently, development finance institutions classify countries as either low, middle or high-income based on their gross national income, which forms the basis for the interest rate at which the countries borrow from those institutions.

Countries that are considered in the middle-income category, including Barbados and several other Caribbean Community member states, fall outside the criteria for receiving concessional finance and therefore borrow at a much higher rate.

The CDB president argued that it was almost as if countries were being penalised for making progress when they go from being a low or less-developed classification to a middle-income or better.

“It is used to our detriment because it is almost as if you get penalised for progress too early. So you graduated, you have gotten to a point that is good or better, but what is missing [is that] we forget that irrespective of how much better you’ve improved, the things that prevent us from growing have not changed. The constant repetition of being hit by natural disasters has not changed; the shocks that we have from external factors have not changed, our structural issues, whether it be our size . . .” said Leon.

“We have now sought to, and we are in the process of advocating on this, that we need to think about this differently, and we need to think about it differently from the simple perspective that what really matters is not the income that you have achieved, but your ability to recover when you have a crisis that has actually hit you,” he explained.

This comes on the heels of several calls by Prime Minister Mia Mottley and several of her government ministers for a change to the concessional financing rules employed by the development finance institutions.

Describing the current method for financing as “inadequate” and affecting all developing countries that fall within the middle-income category, Leon said it was time for it to be changed.

“What we are proposing is something that will have impact not only on CDB borrowing member countries, but the entirety of the developing world that has access to concessional finance and that label developing, less developed or developed, according to a GNI (gross national income) classification,” said Leon.

He said in the meantime, it was his intention to make changes within the CDB “to benefit from a more equitable way of addressing the needs of our members, even if we do not get to the point where we become accepted internationally”.

Leon, was addressing a media conference on Tuesday to announce the upcoming CDB 52nd annual meeting of the board of governors, which is scheduled for June 1-16. It will take place online and in person.

He said the matter would be ventilated during those meetings, which will be held under the theme Measure Better to Target Better: Adaptation and Resilience.

This year’s President’s Chat, a series of discussions with members on key development issues, is expected to include the presidents of the CDB, the Inter-American Development Bank, European Investment Bank and the African Development Bank.

Officials are also expected to discuss issues surrounding climate change; linking the sustainable development goals to national budgets; food security; renewable energy and economic recovery and access to finance.

Dr Leon said he believed there were three broad pillars critical for the development of the region – better measurement in order to be more targeted, the need for development finance and more sharing and partnerships.

Stating that these areas must work together, he said “The idea is always that when we grow, when we move forward, we do that in a complete and holistic way so that the development is not lopsided.”
marlonmadden@barbadostoday.bb

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