May 17, 2021

CDB president reveals inherent risk to economic turnaround in the Caribbean

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warren-smith-cdb-740By Marie Claire Williams From Caribbean360

MONTEGO BAY, Jamaica, Friday October 24, 2014, CMC – President of the Barbados-based Caribbean Development Bank (CDB), Dr. Warren Smith, has warned that high debt poses an inherent risk to the success of structural adjustment programmes being undertaken by some regional countries in their bid to turn around their ailing economies.

Addressing the International Monetary Fund’s (IMF) 2014 High Level Caribbean Forum here, Smith said large debt overhangs represent a drag on economic growth, and “failure to tackle this problem in a substantive way, early in the adjustment process, is likely to heighten the risk of premature abandonment of the adjustment programme.

“In short, the slow burn approach to whittling down large debt overhangs is fraught with danger and cries out for an urgent solution. This is especially so for countries which have demonstrated great resolve in adopting most of the appropriate adjustment measures,” Smith told delegates.

He noted however, that the bank, the region’s premier financial institution, has been providing some assistance to countries in that area.

“The Caribbean Development Bank, working with some of the small island states of the Eastern Caribbean, has deployed its balance sheet creatively to assist St Kitts/Nevis and is now working with Grenada to reduce their debt overhang.

“In both instances these initiatives were pursued under the cover of home-grown IMF supported adjustment programmes; if the substantially stronger and larger balance sheets of the international financial institutions are also deployed creatively, similar outcomes are possible for the larger Caribbean countries with sizeable debt overhangs and somewhat different circumstances,” Smith said.

The two-day event, which has brought together regional finance ministers, central bank governors and various stakeholders in the financial sector, is being held under the theme “Unlocking Economic Growth,” and focuses on energy costs, tax competition and financial sector vulnerabilities.

In his address, the CDB president said that another section of the region’s economy that needs urgent attention is the high cost of energy as “a fundamental root cause of the Caribbean’s non-competitiveness.

“The Caribbean is not energy poor. We might not have an abundance of fossil fuels all across our region but we have enough alternatives to be able to make a reasonable dent into the cost of our import bill,” he said.

Smith also called on Caribbean government officials present to address the problem of youth unemployment, which, according to him, data shows stands at upwards of 35 per cent in many countries.

“Our young people are very creative and dynamic. They demonstrate these characteristics across the Caribbean mainly in the field of the arts, music, dance and sports. But that?s not all they have a capacity for,” Smith said.

“A recent initiative by the World Bank to take advantage of the aptitude of our youth in the field of animation is only one illustration of the possibilities for unleashing the dynamism of our young people in a sector where they can build small businesses, earn foreign exchange, and integrate themselves meaningfully into the international value chain,” he added.

Smith also noted that the private sector must be part of programmes to improve the region’s economy.

“Whilst the private sector and civil society at large have a responsibility to ensure that government fully executes all of the reforms necessary for economic growth, they will need to play their role by taking advantage of the improving business environment and stimulating growth through investment,” he said.

IMAGE: DR. WARREN SMITH, PRESIDENT OF CDB (CREDIT: CDB/FLICKR)

For more on this story go to: http://www.caribbean360.com/business/cdb-president-reveals-inherent-risk-to-economic-turnaround-in-the-caribbean#ixzz3H4qie7Bz

 

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Remarks by Dr. Warren Smith President CDB at IMF

Warren Smith Remarks FrontREMARKS by Dr. Warren Smith President Caribbean Development Bank

at the International Monetary Fund’s 2014 High Level Caribbean Forum

Montego Bay, Jamaica October 23, 2014

SALUTATIONS

I am honoured to be able to represent the Caribbean Development Bank in a forum that underscores the determination of Caribbean governments, the private sector and the development community to come to grips with the seemingly elusive issue of sustainable economic growth.

I recently had the privilege of attending the IMF World Bank Annual Meetings in Washington, D.C. and came away with a renewed sense of optimism that the Caribbean countries and the development community were ready to address frontally the root causes of Caribbean economic and social stagnation.

In my welcoming remarks this morning, I would like to share three points for consideration during our deliberations here in Montego Bay.

First of all, very large debt overhangs represent a drag on economic growth. Failure to tackle this problem in a substantive way, fairly early in the process, is likely to heighten the risk of premature abandonment of the adjustment programme.

In short, the slow-burn approach to whittling down large debt overhangs is fraught with danger, and cries out for an urgent solution. This is especially so for countries which have demonstrated great resolve in adopting most the appropriate adjustment measures.

Is there a solution?

It is my view that an appropriate solution may well be hiding in plain sight. The

Caribbean Development Bank, working with some of the small island states of the Eastern Caribbean, has deployed its balance sheet creatively to assist St. Kitts and Nevis, and is now working with Grenada to substantially reduce their debt overhang. In both instances, these initiatives were pursued under the cover of homegrown IMF- supported adjustment programmes.

If the substantially stronger and larger balance sheets of the international financial institutions (IFIs) are also deployed creatively, similar outcomes are possible for the larger Caribbean countries with sizeable debt overhangs and somewhat different circumstances.

The operations of all IFIs are underpinned by the principles of prudential risk management. Safety for our balance sheet is very much at the forefront of our operational thinking. However, we need to recall the maxim relating to the ship which says: “a ship is safe in port; but that’s not what ships are for”.

I, therefore, challenge our larger IFIs to urgently turn their considerable brainpower to devise practical solutions to this very pressing matter.

My second point is that we need to have some “quick wins”. The people need to be onside. They need to maintain hope that, in the end, there will be the prospect of improvement in their lives.

Available data suggests that youth unemployment, at levels north of 35% in many of our countries, needs immediate attention.   Our young people are very creative and dynamic. They demonstrate these characteristics across the Caribbean in music, in dance, and in sports.

A recent initiative by the World Bank to take advantage of the aptitude of our youth in the field of animation is only one illustration of the possibilities for unleashing the dynamism of our young people in a sector where they can build small businesses; earn foreign exchange; and integrate themselves meaningfully into the international value chain.

This initiative must not be allowed to lay fallow. It must be the target of sustained focus and financial resources. Similarly, opportunities must be provided for our youth to express their creativity in other fields deploying ICTs.

These types of initiatives are indicative of a shift in favour of innovation; of passing the ball into the spaces where new goals can be scored, rather than playing the ball continuously into the crowd.

If given the appropriate support, these sectors, in time, can become the dynamic drivers of economic growth.

My third and final point, Mr. Chairman, is that we must ensure that the private sector comes on board early. It cannot wait until we have the perfect platform. Whilst the private sector and civil society at large have a responsibility to ensure that Government fully executes all of the reforms necessary for economic growth, they will need to play their role by taking advantage of the improving business environment and stimulating growth through investment.

Mr. Chairman, I look forward with great eagerness to discussions that will take place

over the next two days on a range of subject matters, pertinent to this burning question of moving the Caribbean economies to a trajectory of dynamic economic growth and avoiding what Madam Lagarde recently referred to as “a new mediocre level of growth.”

I thank you

 

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