IMF: Violent crime killing regional economies

The Caribbean is being warned by a multilateral lending agency that violent crime and insecurity are having a serious impact on socioeconomic development in the region.

Reflecting on the dire statistics, a recently released International Monetary Fund (IMF) blog revealed that despite representing just eight percent of the world’s population, the Caribbean and Latin America accounted for nearly one-third of all global homicides.

Co-authored by Ilan Goldfain and Rodrigo Valdés, the article described the statistics on killings as “alarming”, as the two said it demonstrated the “the urgent need for comprehensive strategies to address the far-reaching effects of crime and violence”.

Citing IMF and Inter-American Development Bank research on the subject, the authors pointed to the effects of insecurity and violent crime which they say increases emigration from the countries, dampens investment, increases inflation and contributes to further inequality.

“It discourages investment, reduces tourism, and drives emigration, further weakening economic resilience and constraining the region’s future growth. IMF research reveals that crime hampers innovation and reduces firm productivity, compounding economic stagnation over time. Leveraging geo-localised data on nightlights, the study finds that halving homicide rates in violent municipalities could increase their economic output by up to 30 per cent. At the regional level, as shown in last year’s IMF research, reducing homicide rates to the global average could boost Latin America and the Caribbean’s annual GDP growth by 0.5 percentage points,” Valdés and Goldfain wrote.

“Conversely, macroeconomic instability often fuels spikes in violence: a recession in LAC is associated with a six per cent increase in homicides the following year, while inflation spikes above 10 per cent are linked to a 10 per cent rise in homicides the year after. Growing inequality further exacerbates the link between economic stagnation and crime,” they added.

Offering possible solutions for policymakers, they insisted that “breaking this vicious cycle” will necessitate a deeper understanding of the root causes of the violent crime problem and the impacts.

They offered: “Rigorous research and better data are essential for designing public policies that effectively reduce crime.”

Valdés and Goldfain pointed out that sound economic policy plays a preventive role. They added: “Stability, low inflation, robust social safety nets, and opportunities that reduce inequality and expand access to education and employment are critical to breaking the cycle of violence and stagnation. Financial authorities are also uniquely positioned to weaken criminal networks by addressing illicit markets, curtailing financial flows, and tackling money laundering—cutting off resources that sustain organised crime.”

On the matter of cross border crime, they argued that trying to tackle crime solely on  a national level was not sufficient and that regional cooperation in the crime fight was necessary.

(IMC1)