Caddle: Crises require new way to deal with debt

If the Caribbean is to rebuild better in the context of an ongoing COVID-19 pandemic and increasing climate threat, a systemic approach to both domestic and global financing is needed.

This is according to Minister in the Ministry of Economic Affairs and Investment, Marsha Caddle who maintained that Caribbean countries have not been waiting for assistance.

“To the contrary, countries like Barbados have been leading in finding new ways to derisk the investment environment for the private sector to stimulate job-led growth. Notwithstanding, the global community must meet its commitments to developing countries made under the Paris Agreement. One way of doing that is by acknowledging that the COVID and climate crises require a new way of treating debt, risk and vulnerability,” she said.

Caddle shared this view on Wednesday during a Ministerial Panel hosted by the World Bank Group Executive Directors for Canada, Ireland, and the Caribbean, on the topic Building Back Cleaner, Greener and Better Post COVID: Turning Point for the Caribbean.

In explaining what was needed from international financial institutions, she said: “If ever there was a time that a rise in debt was not a case of original sin, it is COVID debt – a debt that is large, but unrelated to any prior actions of the government. Yet, adding this debt will, for many countries, if not Barbados, cause debt to be less sustainable than before. This is therefore not the time for lengthy, case by case assessments, but a new multilateral mechanism.”

“We are working with our international partners and supporting the international introduction of new flexible multilateral instruments that introduce equity-like characteristics to COVID debt, where repayments are state-dependent on whether COVID is past and growth is back, for instance. That would make this debt more sustainable, more repayable and, therefore, ultimately of higher credit quality,” she said.

Pointing out that there will be no single recovery moment, the Economic Affairs and Investment Minister said it would be incomprehensible to have any recovery that was not built around climate resilience and the blue and green economy.

“This is why we have framed our Roofs to Reefs Programme as an investment prospectus for a resilient Barbados. All investments and legislative or regulatory change required for a resilient Barbados are represented there: actions needed by the public, private and third sectors,” said Caddle.

She also discussed how other COVID-19 relief programmes in Barbados were addressing risk, along with green and digital transformation.

“In BEST [the Barbados Employment and Sustainable Transformation Programme], the Government is investing in the private sector to finance their wages and investments on easy terms, boosting their returns and lowering their risks. By making it not debt but equity, we are reducing their risks – they only pay it back when they are profitable – and they must engage in green recovery and digital transformation,” Caddle said.

The ministerial panel also included Canada’s Minister of International Development Karina Gould and Grenada’s Minister of Climate Resilience and the Environment Simon Steill.
(PR)