CDB president wants pooling of IMF funds to build greater regional wealthWednesday, October 13, 2021
PRESIDENT of the Caribbean Development Bank (CDB), Dr Gene Leon has called for the pooling of financial resources, or some US$2.5 billion in special drawing rights (SDR) available to regional states from the International Monetary Fund (IMF), to be used in unlocking greater wealth for the Caribbean.
The SDR is an international reserve asset created by the IMF and used by its member countries to supplement or build their national reserves without adding to their debt. In August 2021 the IMF implemented its largest general allocation to date of SDR 456 billion or roughly US$650 billion to address global need in the wake of the novel coronavirus pandemic.
Speaking at the recently concluded second edition of The President's Chat series on the topic of 'Marshalling finance in the Caribbean', Leon said he would be urgently making a proposition to Caricom heads towards crafting a financial mechanism to achieve this objective.
Leon, who also has vast work experience with the IMF, believes that rather than each country individually drawing down and using its allocation, the use of a combined financial instrument would better serve the region if the 1.7 billion SDRs or approximately US$ 2.5 billion was to be invested into an equivalent reserve asset type of instrument with the CDB.
Highlighting how the funds could strengthen capital markets and provide access to better financing in addressing the region's development needs, Leon said “[states] may be able to think immediately of a pool of funds that could be as much as US$5 billion, or even more, which could be used to help in driving the development agenda”
“If we used our SDR allocations, or even if we left it there, we are much worse off than we could be if we were to pool and now utilise those SDRs through the mechanism of leverage in a way that helps build the very capital markets we say we don't have. But, it calls for collaboration and cooperation in a regional sense,” he also said.
In August, Jamaica welcomed an allocation of US$520 million worth of SDR, based on its quota in the IMF. The funds were added to the country's gross foreign exchange reserves, which now inches close to US$4 billion.
Prime minister of Barbados Mia Mottley, who was a guest at the forum, concurred that the recently allotted SDR funding assigned by the IMF to Caribbean countries could be the practical and powerful means needed to improve the economic position of the region. Noting that her country, like many others, was already contemplating use of the funds, she urged the president to move quickly in advancing the proposal.