By: Staff Writer
Mach 9, 2021
Editors for a recently published Inter-American Development Bank (IADB) book said that the Caribbean is “Exposed to financial instability” and “vulnerable” and institutional economic reform is needed.
Moisés J. Schwartz, manager of the Institutions for Development Sector for the bank, and co-editor of a recently published book “Economic Institutions for a Resilient Caribbean,” said: “Basically, what we try to emphasize is that all of these economies, all of these countries in the region are very vulnerable because of their size and because of where they are located.
“They are exposed to financial instability, they are exposed to shocks that come from the outside, such as the ones we are experiencing right now with the pandemic. Also because of a slowdown in economic activities in all the regions in Canada, Europe, the US and so on and so forth.
He continued, “So the main message of the book, and this applies as a nation to the six countries that we cover, is that sound economic institutions place an economy in a better shape now, they’re in a more prosperous path to address whatever shocks a country experiences. So, we are experiencing nowadays a very dramatic shock. So, a sounder your economic institutions are better the prospects for economic recovery simply because these types of economic institutions provide some more there some way of addressing the different issues.”
The book analysed The Bahamas, Barbados, Guyana, Jamaica, Suriname and Trinidad and Tobago on several economic institutions that must be strengthened for a more resilient Caribbean.
Schwartz also said: “We go over several of the fiscal institutions and several of their monetary and financial institutions.
“So altogether, we believe that the Caribbean in one way or another is lagging behind in terms of fiscal strengthening, so, we cover a lot of ground in terms of fiscal policy in terms of taxes, in terms of tax collection, in terms of public expenditure, the way public investments is done and the way public expenditure is implemented along with the way taxes are collected. In terms of monetary policy, the way central banks are being set up and the way monetary policy has been implemented.”
Schawrtz also went on to champion the liberalisation of central banking policy throughout the region as a way to tackle high prices and rising inflation, something he said the book notes as a stubborn challenge for Caribbean economises.
Diether Wolfgang Beuermann Mendoza, lead economist for Caribbean Country Department for the bank and also co-editor of the book, said: “But in general, if you look at the fiscal framework, I think one of the things that we highlight is a need for a multiyear budgeting processes and a multiyear fiscal framework, that would take into account a longer term horizon in planning.”
Mr Mendoza added: “While we highlight is a different emerging approach, something that’s going to be very important going forward is the management of debt. So there’s a chapter on debt management. So we highlight the need for an integrated approach of debt management with all their fiscal institutions.”
Responding directly to the limitation of central banks across the region in policy making that see them stuck to maintaining monetary policy in a fixed rate regime, Schwartz, while acknowledging this is a problem, said: “Another element is transparency in the way you do the operations. So, I understand the constraints you might have when you have a fixed exchange rate. So central banks have little control of the monetary supply.”
He added: “But another important element, as I mentioned before is transparency and also regarding a central bank operations. So, if for whatever reason a central bank provides credit to the government or the central bank provides credit to the financial sector, all of that needs to be much more transparent.
“We try to make the case that countries that are not transparent, burnout in these vicious cycles. So in terms of monetary implementation, so that would be an important element to consider.”
Every country is at a different level of development of their institutions and while the book tries to give a regional look, not all countries should be seen as under one developmental track or development. For example, Jamaica and Barbados have amended their Central Bank Acts and have made implementation of these amendments, but the Bahamas has made amendments but have not implemented any significant changes.