SANTIAGO, Chile (CMC)— The Executive Secretary of the United Nations’ Economic Commission for Latin America and the Caribbean, Alicia Bárcena, says borrowing is not an option for Caribbean countries, stating that access to concessional funding and debt relief is needed to face the coronavirus (COVID-19) pandemic.

ECLAC said Caribbean heads of state and finance ministers met virtually with Bárcena on Wednesday to analyse debt relief proposals and other measures to fight the effects of the pandemic.

Bárcena stressed that Caribbean countries must increase their fiscal space and that they need more favourable financing conditions, “notwithstanding their income per capita income levels, in order to face the pandemic’s effects.

“Considered as middle-or high-income countries, Caribbean countries face a lack of access to liquidity on concessional terms. This is why policy proposals to support economic recovery with a people-cantered approach are urgently needed.”

Several regional prime ministers were present, including Gaston Browne of Antigua and Barbuda,  Dominica’s Prime Minister Roosevelt Skerrit, Bahamas Deputy Prime Minister Peter Turnquest, St Vincent and the Grenadines Finance Minister Camillo Gonsalves as well as  Andrew A Fahie, Premier and Minister of Finance of the British Virgin Islands; and Montserrat’s Premier Easton Taylor Farrell.

ECLAC said all of them expressed concern at the highly vulnerable economic situation that the countries of the sub region were currently facing.

They also urged ECLAC’s support of their advocacy in engagement with the international community for better access to grants and concessional financing, given their inability to service debt payments in the current circumstances.

“The economic burden for our countries has been unsustainable because of the high levels of debt,” Prime Minister Browne said, noting “we don’t have the capacity for printing money and our policy instruments are very limited.

“What is required at this point is some level of support from international financial institutions, such as the International Monetary Fund (IMF) and the World Bank. ECLAC can help us advocate and raise its voice for us.”

Describing innovative ways by which concessional financial assistance might be extended to Caribbean economies, Prime Minister Browne proposed that consideration be given to having credit extended to countries which have already invested in green technology.

This, he suggested, could be applied through debt relief, informing the meeting that Antigua and Barbuda was already exploring this option.

For his part, Gonsalves identified the IMF Rapid Credit Facility (RCF) as an important mechanism, “which typically offered timely liquidity support free of conditionalities”.

He urged ECLAC’s support in promoting new financing instruments for the Small Vulnerable Economies of the Caribbean, and in advocating that valuable financial instruments such as the RCF remain available and unchanged during these challenging times.

He also suggested that other innovative instruments such as that of offering debt forgiveness to countries impacted by the Ebola epidemic in Africa be considered in these similar circumstances created by COVID-19.

Gonsalves also intimated that urgent practical interventions are needed to deal with liquidity challenges, before they become issues of solvency.

A strategic plan of support for the countries of the Caribbean in the short-term is, therefore, urgently needed, he said.

Bárcena reassured the subregion that this dialogue’s results and key messages would be delivered to the United Nations Secretary-General António Guterres to be considered in his platform of advocacy on behalf of small island, middle income countries in his engagement with the international financial community for support.

“We find ourselves in very challenging times. There can be no doubt that COVID-19 will have a profound and lasting impact on the welfare of our countries and our region for the next several months. We are putting the Caribbean first in everything we do.

“It is commendable that every government has been putting the health and wellbeing of their populations first; and so, I am happy to see the progress that has been made in controlling the spread of infection across the Caribbean,” she added.

“However, this effort has come at a very high cost, particularly in your subregion,  which already suffers a high level of vulnerability to both climatic and economic shocks, and with many of your economies already shouldering debt that is still very heavy, even with progress made to reduce external debt levels in recent years,” Bárcena said.

She further noted that the impact of the COVID-19 pandemic in Caribbean countries has translated into both domestic and external challenges, the most significant of which include revenue and income losses, a drop in investment, rising unemployment, increased indigence and poverty, the failure of small and medium sized businesses, and challenges to the financial system.

Bárcena said external challenges include the near total shutdown of air and cruise travel, dealing an immense blow to the tourism sector; stress in related supply chains (agriculture, construction, hotels, restaurants); a sharp contraction in larger economies, a downturn in commodities prices, the contraction of foreign direct investment (FDI) flows and remittances; disruption in transportation and global supply chains; risk aversion for external investors and financial turbulence, and restrictions on foreign exchange availability.

The ECLAC official noted that the high debt levels and interest payments limit public expenditure, underscoring that “Caribbean economies have the highest debt ratios in the world, averaging 68.5 per cent of GDP (gross domestic product) in 2019.

“Reductions in production and income along with increases in borrowing will further rise debt burdens. Debt is rooted in external shocks, compounded by the impact of natural disasters and inherent social and economic structural weaknesses.”

Given the nature of the assistance offered to the Caribbean by international financial institutions and development agencies for facing the pandemic in the short term, increased public debt is inevitable, said Bárcena.

Moreover, she said the recovery path of Caribbean countries will be more difficult than those of other economies, given the characteristics of their productive structure and in light of the ever-present threat posed by the upcoming hurricane season.

“It is urgent that there be effective coordination and interaction between multilateral institutions, donor countries, and small States debtor countries. Member States will require flexible support from multilateral institutions, including lines of emergency financing.”

The ECLAC’s Executive Secretary stressed that relief for debt service payments can be extremely useful to supporting financing needs.

“The ECLAC’s resilience fund proposal has the potential to offer much needed long-term relief particularly to middle income countries. Acceleration of the debt swap initiative and establishment of the ECLAC Climate Resilience Fund is needed, given the impact of the pandemic and the potential for an active hurricane season in 2020,” she said.

 “We have heard from all of you that you need immediate action. Borrowing is not the answer to confront this crisis. Caribbean countries need grant support fast. There is need for urgent intervention to ensure liquidity.

“Let me say that we are very much on board. We are part of this. A game plan for the short term is needed and we have to work on this, together with CARICOM, ACS and OECS,” Bárcena said, adding “we will continue to advocate for this debt relief, for grants, for concessional funding for the Caribbean countries”.