By: Kimberly Ramkhalawan
January 20, 2023
It’s the start of a new year, and the Caribbean Development Bank is sounding a call for more utilization of the region’s private sector if it is to get ahead in achieving the UN’s Sustainable Development Goals by 2030.
In its annual press conference, the Caribbean Development Bank is advocating that more needs to be done if the region is to emerge from the effects of the Pandemic, all while ensuring its resilience against the shocks emanating from the global issues such as the Russia-Ukraine war, soaring import prices associated with supply and demand as well as logistic issues.
According to CDB President, Dr Hyginus Gene Leon, “the pandemic amplified structural weaknesses in economies, all while highlighting financial needs of countries in the region”. Highlighting that borrowing Member Countries, BMCs accounted for US$300M during the period 2018 to 2022, the bank anticipates that Gross Financial Needs, GFN, is expected to remain heightened for the next six years, requiring a greater push for mobilized financing on the Caribbean front.
Statistics also show that in 2022, the CDB approved Grant and Loans totalling a sum of US$158.1M, marking 15 percent over the previous year, while disbursements totalled US$292.5M, while at the same time, making strides in what it calls its key projects in Suriname, Guyana, Bahamas, St Vincent and the Grenadines and Belize.
As the Caribbean’s Gross Financial Needs (GFN), which increased to almost US $10bn in 2020, Director of the CDB’s Economics Department Ian Durant, explained that GFN’s were described as what is created from the overall deficit country’s run and resulting in the need for amortization. He attributes deterioration in overall balances arising from the pandemic, accounting for the overall component of financing increase, something he says, prior to the pandemic was actually declining. Durant notes once there is continued improvement toward fiscal performance, over time this deficit component of the GFN will decline, while the amortization segment becomes more stable based on past debt. However, Durant says these estimates are based on the existing policy frameworks of governments currently, what they said and intend to do. He notes that the CDB recognizes that if it is to hit the SDGs by 2030, there is a need to increase capital expenditures properly immersed in the notion of debt sustainability. He also underscores the constant need for access to concessional resources, with the most optimal being grants, not compromising other factors such as development impacts, dividends inclusive of generating growth, all being the denominator in debt sustainability analysis.
As part of the CDB’s role in providing this developmental financing, its President Dr Leon says it “recommends the broadening regional financing systems to create financial markets that will facilitate intra and inter Caribbean flows of capital geared toward mobilizing regional savings and driving a partnership with the private sector for financing its development”.
For 2023, the CDB has devised the Accelerated Sustainable Energy and Resilient Transition, also known as the “ASERT-2030” framework to expedite region’s energy shift. Part of this involves the CDB working with its BMCs to support the establishment of Legal and Regulatory Frameworks, policies, and programmes that support renewable energy and energy efficiency. It also looks to explore fiscal regimes and other measures that will expand the engagement of the local and regional private sector, while also focusing on research and development initiatives on renewable energy technologies more suited to the Caribbean environment.
Dr Leon’s idea of transforming private sector engagement he says involves Transforming traditional Public-Private Partnerships (PPPs) to Partnerships for
Prosperity and Profits, all while creating an environment for investing in innovation that offers public value propositions that in turn also offers viable investment opportunities.
He says pivotal to regional development was the need to see the transition from
private sector led growth to private sector led development, something he likened to having a football team with the best strikers sitting on the bench, if they are not being utilized, causing the region to lose the end game.
Actions necessary to meet the Region’s financing needs and address fiscal pressures also include strengthening public financial management and expenditure ecosystems to ensure transparency and accountability in government spending and the allocations of resources. While he highlighted prioritizing macro-fiscal stability to access increased financial resources at more concessional terms. Supporting the rechanneling of at least two percent of Advanced Economies excess Special Drawing Rights (SDRs) to enable transformation of Caribbean economies.
According to Dr Leon, the Private sector involvement is based on offering value propositions in development outcomes that can crowd in private sector financing. When this is done is reduces public sector investment and debt allowing countries to move toward achieving SDGs. For the region, he adds that all the plans outlined are embedded within the CSME, while the CDB’s call for action is through re-engineering, re-imagining development, as it is understood in the region and what is needed to get done actually get there”, if this is done, the CSME dream becomes a reality. To this pointed to external trade, reimagining what trade looks like, in goods, services, whether its called south-south, circular, foundation of that being anchored on knowledge creation products. He added this was one area, “the region did not have a comparative disadvantage in”, and once mobilized within the appropriate mechanisms, Dr Leon believes “intellectual property rights with focus on the creative industries on the ability the harness services that the region can produce while ensuring at the global level those are accepted and integrated in the trade infrastructure done in a way that satisfies norms of markets and protocols of various agencies”, with the end result providing the opportunity to crack and break the straight barriers currently faced.
Looking forward to what the new year holds, Isaac Solomon, Vice President of Operations at the CDB, forecasts regional growth of 5.7 percent in 2023, anchored on the continued resuscitation of tourism arrivals and continued investments in the energy sector. Nevertheless, he forecasts this is subject to some downside risks since most Advanced Economies are on track to register lower growth relative to 2022, increasing the likelihood of a global recession. Solomon warns when coupled with continued, albeit lower inflation, this slowdown in economic activity could trigger stagflation. But things look up with a predicted economic growth expected to boost government revenues and aid in improving fiscal outturns. In addition, some BMCs have signaled intentions to intensify consolidation efforts in 2023 to get back in line with fiscal rules suspended during the pandemic period. Solomon says effects of tighter monetary policy in 2023 among advanced economies in response to stubbornly high inflation will be felt within the region through higher interest rates on sovereign instruments, downward pressures on possibly both foreign direct investment and inward remittance flows. The second-round effects of such policies can adversely affect the Region’s ability to access adequate concessional development financing, and to sustain progress towards attaining the Sustainable Development Goals.
As of December 31, 2022, CDB approved nine projects and disbursed US$25M under the 50M Global Loan Programme. CDB, in partnership with the CARICOM Secretariat and OECS Commission, developed the Let’s REAP Programme to provide schools in BMCs with a roadmap to address the pandemic related learning gaps and increase inclusion.