By A.T. Freeman
Speaking at the 20th Special Meeting of CARICOM Heads of Government on 3 July, Barbados Prime Minister, Mia Mottley, declared that the International Monetary Fund (IMF) would provide Caribbean countries with US $1.7 billion in new emergency funding to support their response to the Covid19 crisis. She further stated that both US Secretary of State, Mike Pompeo, and Secretary of Treasury, Steven Mnuchin had expressed backing for the IMF move and had also stated that they were prepared to support temporary access to World Bank funding for Caribbean countries – such as Barbados and the Bahamas, which no longer qualify for World Bank loans – in order to help with Covid 19 related expenditure. This move from the IMF was mirrored by the Inter-American Development Bank (IDB) which announced that it would make an additional US $3.2 billion available for Latin America and the Caribbean in 2020, bringing its total available loan capital for the region to address the Covid19 crisis to US $12 billion. For its part, the World Bank, officially known as the International Bank for Reconstruction and Development (IBRD), announced some US $205 million in Covid 19 funding aimed at Caribbean countries. Of these funds, US$20 million were disbursed as a grant to Haiti, while the remainder were a mix of non-concessional and concessional loans.
Deepening Debt Crisis
These Covid 19 ‘support measures’ have the effect of deepening the debt crisis in the region. In fact, they go in the opposite direction to the statement of Alicia Bárcena, Executive Secretary of the United Nation’s Economic Commission for Latin America and the Caribbean (ECLAC), speaking at a meeting of Caribbean Heads of State and Finance Ministers with ECLAC, at the end of April. In her statement to the meeting, Bárcena declared that since the Caribbean is the world’s most highly indebted region, “borrowing is not the answer to confront this crisis. Caribbean countries need grant support fast.” She further added that the region also requires debt relief. Addressing the same meeting, Antigua’s Prime Minister, Gaston Browne, stated that “the economic burden for our countries has been unsustainable because of the high levels of debt. We don’t have the capacity for printing money and our policy instruments are very limited.”
Economic and Social Impact
The Covid 19 crisis has had a profound economic and social impact on the region. Important economic sectors like tourism have collapsed. There has been a significant drop in commodity prices such as oil. Capital flight has increased and remittances into the region have also been significantly reduced. The Managing Director of the IMF, Kristalina Georgieva, addressing a conference of Latin American and Caribbean leaders at the end of June stated that the IMF predicts a 9.3% contraction of the economies of Latin America and the Caribbean in this financial year. The United Nations in its publication ‘The Impact of COVID-19 on Latin America and the Caribbean’ has stated that this economic contraction “could push the number of poor up by 45 million (to a total of 230 million) and the number of extremely poor by 28 million (to 96 million in total), putting them at risk of under-nutrition”. In addition, unemployment in the Caribbean is currently in excess of 30% in many countries. The Covid 19 crisis has also become a trigger for worsening the region’s indebtedness, which will inevitably lead to further attacks on people’s standard of living. These developments highlight the failure of the existing social, economic and political arrangements in the region.
Purpose of Loans
A brief look at what some loans are being used for raises further important questions. For example, a World Bank loan of US$6.6 million to Dominica is intended for the purchase of drugs, medical supplies and equipment, laboratory supplies to boost testing capacity and for minor retrofitting of isolation units; a loan of US$2.5 million to Grenada will fund the purchasing of personal protective equipment for healthcare workers, medical equipment, laboratory equipment and tests and the retrofitting of isolation units; a loan to Saint Lucia of US$10.5 million is intended to increase testing capabilities, build isolation units, enhance public information campaigns and support the rehabilitation of Victoria Hospital and other medical facilities; a loan to Saint Vincent and the Grenadines of US$4.5 million is intended to purchase personal protective equipment, mobile isolation units, testing equipment, reagents, gloves, and masks while a loan of US$20 million to Trinidad and Tobago is aimed at purchasing medical supplies needed for testing and diagnosis, inputs for infection prevention and control in health facilities, and personal protective equipment for staff.
The question that naturally arises from this scenario is why after some 60 years of independence, Caribbean governments are borrowing money to buy medical supplies and maintain health facilities when this should be considered a routine responsibility of government to be funded out of the economy.
At the root of the problem lies the political failure to address the anti-people nature of the Caribbean economies. From the end of the 15th century, these were created as appendages of the imperial economies of the European powers and forcefully integrated into the globalised capitalist economy in that role. The plunder of these economies during slavery and colonialism produced fabulous wealth in the imperial countries while leaving the people of the Caribbean in poverty and want. This process has continued until today. The debt burden in the region is one of the mechanisms through which the plunder continues, with the region’s governments paying, on average, some 30% of their revenues in debt servicing. This figure dwarfs allocations for health, education and other social provision that the people need. In addition, the Bretton Woods institutions strongly push “their fiscal reform agenda” in the region which amounts to driving even deeper cuts in the embryonic social provision of the region’s states. In so doing, they create greater opportunities for increased indebtedness in the face of future crises.
We must raise the demand for a change of direction in the regional economies so that these can serve the people’s needs rather than those of foreign moneylenders. Regional economies must have as their primary aim ensuring that all who live here have, as fundamental human rights, a livelihood, food, clothes, shelter and access to medical care and other 21st century social provision.
At the heart of the decision making about how the region’s wealth is distributed must be the working people, the creators of this wealth. The exemplary Covid 19 response of Cuba which – despite 60 years of economic suffocation by the USA demonstrated its ability to help not only other Caribbean countries, but also much larger countries in Europe – shows what can be achieved when a country orientates its economy in a pro-people direction and invests in the well-being of its citizens. The time is now for a fundamental change of direction in Caribbean economies so that post-Covid does not resemble pre-Covid.