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Region ignores World Bank debt facility

Barbados and fellow Caribbean Community (CARICOM) countries have access to funding from the World Bank to assist with debt management, but all but one country have failed to take advantage of this facility.

Global lead on fiscal policy at the World Bank Group Shan Gooptu today disclosed to the 11th annual meeting of the group of Latin American and the Caribbean Debt Management Specialists at the Hilton resort, that CARICOM requested the initiative from the lending agency two years ago.

Global lead on fiscal policy at the World Bank Group Shan Gooptu.

Global lead on fiscal policy at the World Bank Group Shan Gooptu.

However, he said Grenada was the only country to make use of the programme.

Gooptu was responding to a comment by Dr Damien King, head of the department of economics and director of the Caribbean Policy Research Institute at the University of the West Indies (UWI), regarding the need for a mix of fiscal austerity, economic reform and relief in driving down debt.

“In response to the CARICOM ministers request the World Bank has put together what we call a comprehensive growth and debt framework, which basically simultaneously looks at high debt, low growth and natural disasters in the form of a package.

“So far, in the last two years only one country has come to us, which is Grenada. In fact, I came here myself to Barbados to the Caribbean Development Bank to make a presentation at the initial stages of design of that proposal, so that proposal is up and running” said Gooptu, pointing out that Grenada was in the process of “designing a package of assistance which will look at the three areas” of fiscal austerity, economic reform and debt relief, including private debt.

Gooptu did not outline the terms and conditions associated with that initiative.

And pointing out that small states had a history of fiscal imbalances, vulnerabilities, declining competitiveness due to natural disasters and their size, Gooptu added that starting three years ago, based on CARICOM meetings, the World Bank was responding to the needs of the region.

One response, he said, was the International Development Association (IDA) financing options introduced as a form of “concessional window” for middle-income countries in the region that did not qualify for that type of financing under “normal circumstances”.

“But we have basically given small island economies exception now, which basically gives, despite their high per capita income levels beyond the operational cut off for IDA, they get IDA financing, of course with certain limits,” he said.

“Secondly, we also have recently introduced a counter cyclical funding facility which we call the Crisis Response Window (CRW), and we also have another one which is an immediate response development policy lending, which is budget support to countries in the event of a natural disaster, and in some cases we also have a catastrophic risk differed draw down which is like a credit card,” added Gooptu, who described it as a risk mitigation facility.

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