CARIBBEAN Community (Caricom) leaders have authorised the establishment of a Regional Stabilisation Fund (RSF) to help cushion economic fall-out in member states, but Jamaica has warned the facility has to be clearly thought out with specific rules of how it can be accessed.

The leaders, including Prime Minister P J Patterson, took the decision at a special one-day economic summit in St Lucia on Friday — called to discuss the deep fiscal crises being faced by some member states — and mandated a group, led by Barbados prime minister, Owen Arthur, to begin work immediately on the structure of the fund.

The group is to meet on August 23 in Barbados, which is also the headquarters of the Caribbean Development Bank (CDB) which is to co-ordinate the fund.

Additionally, the leaders told the Guyana-based Caricom Secretariat to send a technical team to Dominica, the likely first recipient from the RSF, to assess that country’s request for an emergency EC$50 million (US$18.5 million) aid package to help drag it from a fiscal crunch.

The Arthur Group is expected to work out issues such as the size of the RSF — expected to be in excess of US$100 million — how it is to be financed and the specific mechanism through which it can be accessed.

On Friday, Jamaica’s finance minister, Omar Davies, told Jamaican reporters in Castries that his country expected to “play a critical role (in the RSF), given its long history of being involved in such programmes”.

Davies, however, stressed the need for “details and specifics” if the facility is to be successful.

Jamaica, given its own economic and fiscal position — with a national debt of nearly 140 per cent of GDP, debt-servicing accounting for over 60 per cent of the national budget and a deficit of more than four per cent of GDP — is likely to be tapped more for its intellectual leadership than its capacity to contribute substantially to the fund.

It was not immediately clear what working model the Arthur Group will take to Friday’s meeting. But Derick Latibeaudiere, the Jamaican central bank governor, who is expected to be in Bridgetown, could be a key player in shaping the arrangement, given Jamaica’s long history with support facilities from the International Monetary Fund (IMF), its current Article IV arrangement with the fund and its debt resolution scheme through a vehicle called Finsac to bail out collapsed banks and insurance companies.

Latibeaudiere was not available for comment yesterday, but a senior public sector official who worked on some of these schemes said: “It would make absolute sense for Caricom to tap Jamaica’s experience in working on these schemes. We, by now, should know the pitfalls.”

Other key players are expected to be the CDB president, Compton Bourne, and the governor of the East Caribbean Central Bank, Dwight Venner, who outlined Dominica’s crisis at the St Lucia summit.

Among Jamaica’s concerns with the proposed RSF is that it does not go the way of the Caricom Multilateral Clearing Facility (CMCF), the scheme that was used by the community for trade settlements prior to exchange liberalisation.

Under that US$100-million facility, imports and exports between member states were set-off against each other, with the difference, by the country with the deficit, being cleared in US dollars.

It collapsed when Guyana ran up huge arrears, mostly to Trinidad and Tobago which is at the forefront of mounting a broader stabilisation programme for Caribbean economies, especially Dominica’s, whose banana-dependent economy is facing a severe downturn.

The island has been hit by receding protection on the European market for bananas, a situation that will worsen towards the end of the decade when preferential access will be all but eliminated.

Conference sources disclosed that up to yesterday there were pledges of financial assistance for Dominica to be channelled through the RSF, amounting to approximately EC$37 million. The initial donors were the governments of the Organisation of Eastern Caribbean States (OECS) with EC$15 million; Barbados, EC$12 million and Trinidad and Tobago’s EC$10 million.

Originally Trinidad and Tobago had singalled that it would allocate US$8.3 million (EC$22.4 million) for the multilateral regional fund. But Prime Minister Patrick Manning has now indicated that the proposed amount would be EC$10 million and that it would be raised in the form of bonds issued through the Trinidad and Tobago Central Bank.

This process would be advisable since, without a functioning parliament, his government has no authorisation to make such a loan available at this time, Manning explained.

Manning also has another problem regarding Dominica: an existing court battle between the Dominica government and the Trinidadian RBTT Merchant Bank over a US$35-million debt on which RBTT says the Roseau government defaulted.

The Pierre Charles administration has been unable to meet many of its local public sector debts, and Davies has stressed that even if it got assistance now, the country would have to institute a medium- to long-term recovery programme.

“It is impractical to depend on a series of short-term measures,” Davies said.