ECLAC presents a debt alleviation strategy based on a debt swap proposal at high-level meeting in Saint Kitts
ECLAC has made a call for the creation of a CaribbeanResilience Fund as part of a debt alleviation strategy based on a climatechange swap proposal. “The swap will involve the use of pledged climate fundsto write down the public debt of Caribbean countries and create the financingnecessary to fund climate change adaptation and mitigation initiatives andinvestment in green economies, which in turn will be administered through aCaribbean Resilience Fund”, Alicia Bárcena, ECLAC’s Executive Secretary, saidduring the fourth meeting of the Caribbean Development Roundtable (CDR), heldin Basseterre, Saint Kitts and Nevis on 21 April 2016.
This proposal stems from the recognition that whileCaribbean countries are among the most highly indebted countries in the world.The subregion’s high debt dilemma was linked to external shocks, compounded bythe inherent structural weaknesses and vulnerabilities confronting CaribbeanSIDS with limited capacity to respond. Many Caribbean countries belong to themiddle income category, which constraints their access to concessionaryfunding.
Addressing government officials and representatives ofnumerous regional and international organizations during the opening of theCDR, the most senior authority of the Economic Commission for Latin America andthe Caribbean (ECLAC) presented a proposal on debt for climate adaptationswaps, which detailed a strategy for the growth and economic transformation ofCaribbean economies, in light of the heavy debt burden being faced in thesubregion.
Bárcena explained that resources from the Green ClimateFund (GCF) could be used to write down Caribbean public debt from multilateraland bilateral lenders, and to buy back debt from private creditors at a steepdiscount. With the newly found fiscal space, Caribbean governments would thenmake payments into the Caribbean Resilience Fund, which would in turn be usedto finance resilience capacity building in climate change mitigation andadaptation, and invest in green economies.
ECLAC’s debt for climate adaptation swaps proposal callsfor donors to use pledged resources from the (GCF) to finance a gradual writedown of 100 per cent of the Caribbean Small Island Developing States’ (SIDS)multilateral debt stock held at various multilateral institutions as well asthe bilateral debt stock of Member States.
Responding to Bárcena’s presentation, the Honourable VanceAmory, Premier of Nevis, Minister of Finance, Nevis Island Administration andActing Prime Minister of Saint Kitts and Nevis, affirmed that “one cannotdownplay the potential negative impact of climate change on our fragileeconomies and our ability to provide future economic growth”, and in thisregard underscored that “we have to put together a cohesive approach so that wecan have the desired response to the need to pay our debt”.
Discussions during the CDR also focused on prospects forpursuing the achievement of the Sustainable Development Goals (SDGs) in theCaribbean. Executive Secretary Bárcena emphasized that the current debtoverhang and environment of fiscal constraint makes it almost impossible forCaribbean governments to make the desired public sector investment in greenindustries, which would stimulate growth and promote economic transformation inthe Caribbean. The debt for climate swap proposal is intended as a strategy tocreate the fiscal space for such public investment.
Participants in the Roundtable highlighted a number ofcritical issues that increased the vulnerability of Caribbean SIDS, notablyclimate change and a range of social challenges, including population ageing,non-communicable diseases (NCDs) the persistence of poverty and inequality,high youth unemployment, the loss of skills through emigration, and lowtechnological capacity. These concerns they affirmed would have to be addressedthrough SDG implementation.