by Marlon Madden
Barbadian authorities continue to make progress in their quest for international development banks to widen the eligibility for concessional finance for climate-vulnerable countries. Prime Minister Mia Mottley, who is co-chair of the UN Secretary-General Sustainable Development Goal (SDG) Advocate Group, recently won a temporary move from the World Bank on this
new eligibility request.
However, Professor Avinash Persaud, Special Envoy to the Prime Minister on Investment and Financial Services, told Today’s BUSINESS while he is upbeat about the progress being made, “[We are] definitely not there yet”.
Since the 1960s, eligibility for concessional finance from the major international development banks was based around very low income per head (currently less than US$1,300 per year, compared to our level of over $16,000).
This being the case, Barbados and other countries that are considered developing countries, are not able to access affordable financing to tackle a range of issues including pandemics and natural disasters, as well as being able to meet long-term climate goals. At the same time, however, richer countries are readily able to easily access funds whenever disasters strike.
Mottley made the case for Barbados and other small island developing states during the May 22 -23 Global Citizen NOW thought leadership summit in New York City, and again with her team during the June 6 to 10, 2022 IX Summit of the Americas.
“We have made the case that eligibility should be extended to climate vulnerable countries. We have come up with a Barbados definition of climate vulnerability – any country with a high probability of facing a climate related disaster with the next two years that would cost more than five per cent of national income,” said Persaud.
To get this bold change, he pointed out, “a majority of the Boards of the development banks need to agree”. “The US often has the largest shareholding in these banks and so their support to our initiative is critical,” said Persaud. Today’s BUSINESS understands that the US has given an informal support so far.
However, Persaud explained that “the Prime Minister and team won temporary eligibility from the World Bank for concessionary finance at interest rates below two per cent to help with the costs related to the Pandemic.
The Prime Minister and team also helped to move eligibility for the US$50 billion International Monetary Fund’s (IMFs) Resilience and Sustainability Trust (RST) which we championed the need for and which was approved and established in April of this year,” he explained. The fund, which give loans with a 20-year maturity and a 10.5-year grace period, has climate vulnerability as one of the eligibility criteria.
According to the IMF, it complements its existing lending toolkit by focusing on longer-term structural challenges including climate change and pandemic preparedness – that entail significant macroeconomic risks and where policy solutions have a strong global public good nature. About three quarters of the IMF’s membership will be eligible for longer-term affordable financing from the RST, including all low-income countries, all developing and vulnerable small states, and lower middle-income countries.
Pointing out that Barbados would continue to push for a permanent change, Persaud stressed that “access to concessional funding for climate change adaptation, like sea front defences, more hurricane resistant roofs [and] more resilient coral reefs, means more space for investing in public education and health”.
“Increasingly, adapting climate change – droughts and floods and higher temperatures and encroaching sea – is going to be the single biggest cause of higher debt,” he said. The economist stressed that repaying this debt without concessionary terms will “crowd out our ability to invest in social protection and education and health”.
“That is what is at stake. It’s not theoretical or statistical and about a distant future, but about dollars and cents today,” said Persaud.