IMF recommendations for regional transformation


IMF recommendations for regional transformation

Thursday, November 07, 2019

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BRIDGETOWN, Barbados (CMC) — Deputy managing director of the International Monetary Fund (IMF) Tao Zhang says in order for regional transformation to take place, there are three vital areas of focus.

Speaking at the ninth Caribbean Forum, which opened here yesterday, Zhang said the areas are regional integration and leveraging common institutional arrangements, working towards a disaster resilience strategy, and improving tax policy.

“The theme of this forum is regional transformation. I think this is important because regional transformation is essential to support higher economic growth for the Caribbean. For too long, economic growth in the Caribbean has languished, offering too few opportunities, in particular, for its young people. This has led to rising social and economic challenges — including poverty, inequality, unemployment and crime.”

Zhang, in elaborating on the area of a disaster resilience strategy, said that climate change is expected to intensify the impact of natural disasters and worsen the vulnerabilities of small states like those in the Caribbean.

“Rising sea levels increase risks of erosion and flooding, and warmer water temperatures heighten the potential for more intense hurricanes. We must come together to address the challenges posed by climate change and help those most affected by it,” he told the more than 200 delegates gathered at Lloyd Erskine Sandiford Centre.

Recent IMF analysis identified a three-pillar strategy for building structural, financial, and post-disaster resilience, and Grenada is one of two countries that are piloting a Disaster Resilience Strategy.

The other is Dominica.

“Structural resilience will require infrastructure and other investment to limit the impact of disasters. Post-disaster resilience aims to facilitate a speedy recovery after an event, supported by contingency planning such as emergency response planning and related investments,” Zhang said, while explaining that emergency relief and financing the reconstruction effort following catastrophic events like Hurricane Dorian are key responsibilities of the global community.

The IMF deputy managing director said financial resilience is built based on fiscal buffers and using pre-arranged financial instruments to protect fiscal sustainability and manage recovery costs. He disclosed that the IMF has recently increased access to both its Rapid Financing Instrument and to the Rapid Credit Facility to 50 per cent of quota per year, and 100 per cent of quota on a cumulative basis.

Speaking about improving tax policy, Zhang said all Caribbean countries face the challenge of how to maintain a tax system that is competitive, while also raising adequate revenue.

“In the regional context, avoiding a race to the bottom could provide substantial collective benefits,” he told the delegates, which comprised of policymakers.

Zhang also revealed that recent work by IMF staff found that greater intra-regional trade and mobility of people and capital could generate significant macroeconomic benefits, and reminded the participants that deeper economic integration within the Caribbean has been a priority since the establishment of Caricom in 1973, but progress has been limited.

He recommended actions that can have positive impact on trade as a step going forward.

“One example would be reducing non-tariff barriers and trade costs stemming from the absence of harmonised customs laws. Another would be removing legal restrictions that constrain the free movement of people and capital,” he said.

The IMF, the Caribbean Development Bank (CDB) and the Barbados Government are co-hosting the forum.

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