More work on public sector reform in the Caribbean is necessary in order to facilitate its transformation in the post-COVID-19 economy.
This is the contention of assistant manager for research at the Central Bank of T&T, Kevin Finch.
Speaking at a virtual workshop, “Keys for writing a good essay on the development challenges of Latin America and the Caribbean,” Finch said, “So what we have is a public sector that is described as large, bureaucratic, clumsy, highly inefficient.”
In the seminar, organised by the Development Bank of Latin American (CAF), Finch said that if the region must progress on its journey of development, a public sector that is fit for purpose is needed. Currently, he noted that in the Caribbean region, the traditional models of public sector administration have remained unchanged from the colonial era.
Finch said, “So moving forward, I think at least on this front, we would need a public sector that is capable of supporting the new economy.”
He emphasised that in the Caribbean, the government plays a large part in society, in any way that it is measured —whether it be in the number of persons employed or contributions to the gross domestic product.
According to Finch, “You need a proper functioning public sector that can support inclusive growth as well as the structural transformation of many of our economies.”
Nonetheless, Finch said what has been done in the reform agenda has been piecemeal at best. He noted that public sector reform is a big issue and a big challenge, upon which more collective work needs to be done.
Also speaking at the webinar was Reinier Schliesser, principal economist of CAF, who said that the public sector’s role is a very critical one, “Just to refer to something Kevin was saying before, I think it is a very critical issue about the public sector role.”
He noted, however, that an important issue that nobody wants to discuss right now is debt sustainability and fiscal reform. He agreed that it is not going to be one of the main issues in the short-term.
Schliesser said that stakeholders in the Caribbean have to, right now, make the biggest possible effort in terms of trying to better work a way out of this situation. However, he said that eventually, this debt sustainability issue would be important.
In the Caribbean, Schliesser said many of the countries do not have budgetary room for the government to spend more without undermining its ability to sustain revenues (fiscal space), which is due to different reasons.
He said that countries must understand the implications of debt sustainability as the region in the future will need a lot of financing and there may be challenges to international financing encountered.
Of the situation, Schliesser argued “We need to understand what fiscal space is left for every one of the countries in the region and how can we use that space to tackle reforms in the future ahead.”
Another area of research that needs to be put forward, said Finch, is access to finance.
Finch explained, “When I say access, our mind usually goes to financial inclusion. But I think the Caribbean doesn’t have much of a financial inclusion issue.”
Finch spoke about finance from the perspective of accessing different funding vehicles. In terms of the Caribbean financial sectors, Finch expressed that they are traditionally bank based, noting that a lot of the traditional models of financial intermediation do not necessarily dovetail well with the new approaches needed for the new sectors and the new enterprises that will come out of the post-COVID dispensation.
He posited that work on alternative financing mechanisms led by the private sector is needed.
Finch added, “If I could give you one example, I think there is hope for scaling up the use and availability of venture capital in the region to fund some of these non-traditional areas such as fintech (we have a lot of interest in that area), biotech and so forth.”
The Oxford Business Group (OBG) on the 2020 report of T&T, indicated that accelerating development within the country’s financial technology (fintech) space has emerged as a growing priority. The OBG noted that this is necessary to transform the way business is done in the country.
The OBG expressed that prior to the pandemic, T&T was a relatively underdeveloped market in terms of fintech and mobile payments, with most legacy banks preferring to use established interfaces.
However, it posited that with the country already established as a financial services hub, there is significant potential for growth in this area.
Ronald Carter, chief country officer and CEO of JMMB Bank T&T, told OBG: “There are some fintech companies that are already providing solutions in T&T and supporting the delivery of financial services. However, these will only flourish if there is a conducive regulatory framework in place.”
There, therefore, remains considerable scope for the expansion of T&T’s fintech segment in the short to medium term. The OBG noted that the country seems well-positioned to realise this potential, with some progress already achieved during the COVID-19 period, as T&T aims to become a fintech leader within the region.