Economist Joseph Stiglitz

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There is a need for creditors of Caribbean countries to grant a moratorium on the payment of interest on loans, at least to the end of the year, and also reduce the interest rates according to Alicia Bárcena, the executive secretary of the Economic Commission for Latin America and the Caribbean (ECLAC).

Speaking yesterday at a virtual 50th anniversary meeting of the CAF Development Bank, Bárcena said the G 20 has already granted relief to lower income countries, mainly in Africa. She said the Caribbean is also deserving of similar consideration.

She added: “Countries in the Caribbean should be dealt with in a special way and some concessional funds should be granted. They should be relieved on the payment of interests so this can be an aid to them. Paying interest on the public debt of the central government is 6.2 per cent of GDP a year. If the international community had access to forgiving or at least postponing this interest for the rest of 2020 and maybe reduced debt in the Caribbean.”

Barbados Prime Minister and Head of Caricom Mia Mottley has been lobbying for debt forgiveness for middle income and small island states.

Bárcena said an ECLAC study showed that a large part of the indebtedness faced by the region was linked to the constant cost of natural disasters and not mismanagement of public finances.

She also called for the IMF to provide special rights for overdrafts that give more liquidity to economies in the region and help the Caribbean deal with the emerging food and climate crisis.

“In the Caribbean it is urgent to find a way out with solutions based on nature, the economy of oceans that we are exploring quite deeply with them as well as renewable energy, so they don’t have to import energy and so they can empower food security that is so dramatically impacted,” Bárcena told the conference.

Stiglitz: private banks

part of the problem

Also speaking at the CAF virtual event was renowned economist and nobel prize laureate Joseph Stiglitz who argued that private finance is at the centre of many of the market distortions. He said the private banking system is short term and ironically many of the investors are long term, as are many of the investment needs.

He said this is why development banks like CAF are so important, they have a long perspective, taking into account the disparity between social and private returns.

Stiglitz said developed countries like the US are beginning to recognise the importance of development banks like Green Development banks that are helping them to respond to the challenge of climate change.

“The problem is the private markets lend too little in certain areas and lend to much in others. They have incentives to get countries over-indebted, worse when the inevitable happens and there is a debt crisis, the private sector tries to strangle the countries in an irrational way which is not only inhumane but actually undermines their recovery.

Stiglitz said the creditors led by the United States have opposed the development of a good humane and rational framework.

“It used to be that the IMF acted as a creditor collection agency, but more recently they are no longer doing that. They have undertaken a globally responsible role. They have made it clear that debt restructuring needs to be sustainable. In the past the private sector debt restructuring was typically not, and within five years half of the countries that had debt restructuring were back in a crisis.”

He said the ongoing dispute with Argentina and private sector is an example of this challenge .

CAF is the Andean Bank and T&T is a member. During the COVID-19 it has loaned the government more than $1.5 billion and has lent billions more including for the ongoing road paving projects being undertaken by the Ministry of Works.

Its conference was held virtually.

Guardian Media was an official partner.