UNITED NATIONS — Concern over debt vulnerability and risks for small island developing states in the Caribbean, likely set to face another strong hurricane season this year, guided an emerging consensus for action at the United Nations Forum on Financing for Development last week, according to the head of a leading nonprofit financial reform organization.
So far, there is no specific debt relief action plan for the Caribbean region, but it’s something to watch for at upcoming global summits, including the opening of the U.N. General Assembly in the fall, said Eric LeCompte, the executive director of the Washington, D.C.-based Jubilee USA Network.
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Debt relief discussions factored into various events at the four-day forum, during which U.N. Deputy Secretary-General Amina Mohammed called for long-term investment and domestic resource mobilization to help close the annual funding gap of $2.5 trillion for financing the Sustainable Development Goals.
An ambassador from Antigua and Barbuda also reiterated a call for a Caribbean debt relief process.
“We see a consensus emerging about the need for a debt relief process for Caribbean islands to protect them from hurricanes and other natural disasters,” LeCompte said. “What people are really talking about now, is how do we have a permanent process in place that looks to structure and relieve debt after a crisis occurs?”
The International Monetary Fund issued findings last month showing that while economic growth is increasing in low-income developing countries, debt burdens and vulnerabilities have risen since 2013 in many of these countries. The number of low-income countries at risk of, or in debt distress, increased from 13 in 2013 to 24 in January 2018.
The risks are pronounced amongst some Caribbean nations, which were hit with record-setting, back-to-back hurricanes and storms in 2017. Stagnant growth and rising debt-to-gross domestic product ratios in the Caribbean are not new, but at the end of 2016, only two out of 14 independent Caribbean Community countries had debt-to-GDP ratios under 60 percent. The generally accepted ratio for developing economies is 40 percent, according to the Brookings Institution.
Globally, storms caused nearly $370 billion worth of damage last year. Countries like Antigua and Barbuda — where storm damages were estimated at $250 million — continue to repair destroyed infrastructure and agricultural systems, even as they look toward the upcoming hurricane season researchers say will be more active than average. The season begins June 1.
“The new hurricane season is almost upon us and expected predictions so far show that it will be as — or more intense — than last year. [Caribbean] Countries have barely been able to recover — some of them [are] still in the process of getting electricity and housing rebuilt,” said Uma Ramakrishnan, an assistant director and division chief of the Caribbean at IMF.
“The big picture, really, is we recognize the risks will be more intense and more frequent. So from our standpoint, the risk is here to stay. It is not a one-off thing.”
The hurricane season is leading to some movement in discussion about possible resilience solutions.
“There is momentum with the hurricane season, trying to get anything in place,” LeCompte explained. “I’ve been doing this for a long time and I have never seen a moment where global decision makers are taking the situation as seriously as they are now. The seriousness is incredibly significant. If Jamaica gets hit by a Category Five, what does that do to the entire region?”
Some conversations during the U.N. forum in New York revolved around ensuring that a permanent process is in place to address and relieve debt after a crisis occurs, with a focus on resilience.
That structure could look like the Ebola trust fund IMF created in 2015 to address the financial burden on Sierra Leone, Guinea, and Liberia.
Such a framework would have to emerge from the IMF country membership however, and as of now there is no proposal on the table, said Ramakrishan.
The storms and hurricanes last year, though, have prompted a “meeting of the minds” between public, private sector, and nongovernmental organizations, she continued, recognizing the need to boost Caribbean resiliency.
“There is a lot of the funding out there, but a lot of it gets committed after a disaster, postdisaster recovery,” she explained. “One thing we want to see is more allocation or redistribution to support the resilience side. If this is a long-term problem and climate change will be affecting these countries, they need to adapt to this new reality, [that is] where you want to see the financing go.”
The upcoming G-8 summit in June and the G-20 summit in the fall could be two spaces to watch for further discussion on the issue, according to LeCompte.