Look beyond debt relief, says World Bank economist – NationNews Barbados – nationnews.com
Bridgetown – The World Bank’s chief economist for Latin America and the Caribbean, Martín Rama, said on Friday that although there may be a need for solutions to emerge from the crisis caused by the coronavirus pandemic ( COVID-19), he does not share the view that Caribbean countries should seriously consider debt relief only as one of the solutions.
At least one regional leader has touted the need for some type of Marshall Plan for the region, and Caribbean countries have in the past criticized the criteria used to grant them prudential concessions on funding by developed countries and international financial institutions. .
“I think there is an awareness of this crisis that we might need a solution. . . that have to do with debt and there’s a lot of conversation about it,” Rama told regional reporters in a webinar ahead of the release of a World Bank report that notes that Latin America and the Caribbean (LAC) will need a combination of public health measures and economic management to deal with the impact of the virus.
“We are already under pressure, Argentina and Ecuador have restructured their debt, but maybe things are more orderly, especially the poorer countries and you have already seen that there has a finance suspension problem for several of the countries that we pout in the low income bracket.
“Caribbean islands tend not to fall into that low-income bracket that is prioritized. . . Perhaps 20 years ago, there was an initiative for heavily indebted countries of debt relief in return for a clear path to fiscal sustainability.
“Many of the Caribbean countries are among the richest in the region, so the case may be more difficult to make. On the other hand, they are rather countries very dependent on the sector which has suffered the most from the crisis. , i.e. tourism.
But the chief economist argued that because countries in the region are “not big in terms of debt”, he wouldn’t rule out debt relief, “but I don’t think I will bet on it.
“It will not be prudent,” he said, adding “If I think of the Caribbean, anything that sells services, especially in the English-speaking Caribbean, but also in the French-speaking Caribbean, selling services through the Internet is one thing”. it can be done, you don’t need to travel.
“So I think in the mid-term program, the kind of skills needed, the kind of support. . . like how Alibaba in China has organized thousands of villages just to work through the internet and take advantage of everything they do well,” he said. Emphasizing the need to focus on this area “and hope for some form of debt relief, but don’t count on it.
But he said that while he feels international financial organizations and even countries might be willing to provide some form of debt relief, “I won’t bet that will happen because countries in the Caribbean are relatively wealthy in the developing world.
“So I would say aim, push for it, but have a plan B,” he added.
Rama said that despite the pandemic, remittances to Latin America and the Caribbean have increased, noting that most migrants from the region work in the United States.
“Many of them work in construction, in small retail businesses, grocery stores, these activities will be considered essential and will continue,” he said, adding that “many migrants have not lost their employment in the United States”.
He added that the United States had implemented social transfer programs “on a gigantic scale” and that for legal migrants they received welfare checks.
“And the third reason is that I think migrants are part of families and that’s normal, I guess, in a family where the side that’s doing better will help the side that’s going through other problems. So, even if migrants in the United States were doing the same thing as before, you would expect them to help more and if you combine the three things, it’s not totally surprising to see increases of 15% or more compared to the same period last year.”
He said a saving grace for the Caribbean is that “remittances have held up much better than expected. Six months ago, we were all anticipating a sharp drop in remittances. It happened at first, but now remittances are quite consistently much higher or significantly higher than the same time a year ago for countries like Haiti, Jamaica and others, c is very good news”.
The World Bank economist said of oil-producing nations in the Caribbean, while he didn’t have official figures for Trinidad and Tobago, the Washington-based financial institution projects economic growth of 33.2% for Guyana “which will make it the world record in terms of growth, it is much less than where we had anticipated a year ago.
“But I think the challenge for Guyana will be how to deal with this and how to make the most of it. For Suriname, I think it’s still too new, we don’t have an impact. The 2020 figures for Suriname are minus 13%, which is roughly in line with the range we see in the Caribbean.
“Overall, what I would say is that oil and gas prices have been major victims of this crisis, but the problems come from before. The problem comes from what is called the oil glut. …new shale fracturing techniques completely changed it…and at one point the type of cartel arrangements held the price down.
“We are not strong enough to deal with this, he said, adding that the marginal price of oil in the new environment is between 40 and 50 US dollars” and these supplies can be put in place very quickly , because it is relatively very low investment.
“Of course, you can be wrong, but it is difficult to predict that you will go to the windfall of a few years ago. What happened to many oil-exporting countries . . in the region, is that it is relatively easy to adjust upwards when there is money, we set up social programs, we invest in infrastructure, but then if we have not saved enough when the prices go down it creates a fiscal crisis and also a political crisis because no one wants to be the loser.
“So what I would say is that oil prices are probably going to recover from the lows they were at a couple of months ago, but I’m not counting on them to go very high,” he said. Rama to reporters.
Ahead of the release of the report, titled “The Cost of Healthcare,” the Washington-based financial institution said economies in the region were suffering from lower foreign demand, heightened economic uncertainty, a collapse of tourism and the consequences of months under confinement to try to contain the spread of the disease.
The report also notes that with the pandemic expected to continue for an extended period, healthcare systems should consider reforms to improve efficiency and reduce costs borne by governments and individuals.
In addition, governments will need to find ways back to fiscal consolidation after this necessary period of high spending on economic stimulus and emergency social transfers, according to the report. (CMC)