FINANCE minister Audley Shaw will be leading an initiative to convince multilateral institutions to change their policy in its treatment of heavily-indebted, middle-income countries in the Caribbean.

“The prime ministers of Grenada, St Kitts and Nevis and Dominica asked me to play the lead role in putting the issue to the World Bank and the Inter-American Development Bank (IDB),” said Shaw yesterday in a telephone interview from Washington DC, the United States capital.

It was the strong indications made by multilateral financial institutions that they were willing to look at “new financial mechanisms” to assist Jamaica with its debt problem, that made the Caribbean leaders ask Shaw to lead the initiative to get help with their own debt problems.

These countries like Jamaica, according to the finance minister, are heavily indebted countries – having debt-to-gross domestic product (GDP) of more than 70 per cent – but do not qualify for debt forgiveness or concessionary (low interest rate) loans because they are classified as middle income. Jamaica’s debt-to-GDP is approximately 130 per cent.

The International Monetary Fund (IMF) had in the past identified 41 poor countries that have burdensome debts and classified them as Heavily Indebted Poor Countries (HIPC) under an initiative to provide debt relief to them.

But a country is only classified as poor if its national income per person is less than US$950 each year. Jamaica’s GDP per capita was around US$3,900 last year.

Incidentally, Guyana, which received millions of US dollars in debt relief, was the only country to be taken off that list, when it was removed in July this year.

According to a statement issued yesterday, Shaw said that “in meetings with the president of the IDB, Leuis Moreno and World Bank vice-president, Pamela Cox, he had received indication that the banks were willing to examine new financial mechanisms to assist Jamaica in its debt liability management programme”.

“While I can’t provide any further details on what form these mechanisms will take there stated willingness to look is showing that we are breaking new ground in terms of their thinking,” Shaw told the Observer. “In the case of Jamaica, they (multilaterals) are accepting that the heavy debt burden is a barrier to moving towards a growth-oriented economy.”

In tackling this debt problem through multilateral arrangements, Shaw wants to introduce cheaper debt, reduce fiscal deficits and “put Jamaica on a path to attract investment and grow the economy”.

Now Shaw wants to “develop dialogue with the multilaterals for heavily indebted middle-income countries”, as part of a regional approach which he believes will give greater impact to discussions. But first, he plans to call for an early meeting with Caribbean finance ministers to discuss the matter.

The Council for Finance and Planning (COFAP), consisting of finance ministers designated by the member states of the Caricom, normally meets once a year during the second quarter of the calendar year and already met in June this year. This means that any plan to meet before the end of the year will bring forward the meeting of COFAP by as much as six months.

Meeting conditions that may be required of Jamaica and other Caribbean countries who may utilise what the World Bank called “creative financial tools”, according to Shaw, will require fiscal discipline.

“The Jamaica Labour Party’s commitment to bringing fiscal discipline to government is in line with what the multilaterals are asking for,” added Shaw. “Fiscal discipline includes making management more efficient and meeting fiscal targets.”