Day 3: Taking Action
Session 7: Advocating Innovative Financing Solutions
Moderator: Mr. Anthony Prado, Deputy Executive Secretary, UN ECLAC
Speakers: Ms. Gail Hurley, Policy Specialist: Development Finance, UNDP Bureau for Policy
and Programme Support; Mr. Jwala Rambarran, Governor, Central Bank of Trinidad and Tobago
Discussants: Mr. Ransford Smith,
Former Deputy Secretary-General, Commonwealth
Secretariat; Mr. Compton Bourne, Former Executive Director, Caribbean Centre for Money and
Finance
Organized by: ECLAC
Rapporteurs: Sheldon McLean and Michael Milligan, UN ECLAC
1. Background/Context
What can the Caribbean expect from the ongoing discussion on financing for development and
what are the new opportunities for access to finance? What are the new and emerging
opportunities for development financing domestically, regionally and internationally? How can
the region identify strategies, partnerships and arrangements to create a new compact which
seeks to establish a multi-stakeholder platform with governments, international development
organizations, the private sector and academics to arrive at practical solutions?
2. Summary of Presentations by the panelists
Ms. Gail Hurley
A worldwide survey of 7 million persons was used to determine what most people saw as
priorities for development – education, healthcare, job opportunities and honest and responsive
governments. This was one of several tools used to inform a new agenda for development.
There are positive signs for the region, inter alia: vulnerability and shocks becoming
internationally recognized as important; official finance recognized as needing to be more
transparent; an increased focus on social protection. Some troubling signs are, inter alia: an
undue focus on domestic resource mobilization, for which not all states have the capacity;
limited willingness in the Caribbean to finance climate-change mitigation; an increased demand
for public private partnerships, which have an uneven track record; and the lack of mechanisms
needed to hold countries accountable for their commitments.
The biggest challenge is financing development. Few additional public resources are likely to
become available. The private sector can finance only when properly incentivized through
regulatory reform. A lack of bankable projects sometimes limits investments; those countries
with the most bankable projects and capacity will benefit the most in the future from financing.
The good news is that there are more resources than even before to resolve development
challenges.
Mr. Jwala Rambarran
Aid to the Caribbean is now 2% of GDP, compared to 4% of GDP in 1990, despite the rise of
new, non-traditional sources of aid, such as China and Venezuela. FDI has grown rapidly, but
nearly half of it goes to two countries – Jamaica and Trinidad and Tobago. This causes
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governments to resort to costly private capital. Debt levels are unsustainable in several Caribbean
countries with five economies have debt to GDP ratios in excess of 90%.
Remittances have grown to be an important source of external financing, equivalent to about 6%
of GDP for the region and up to 21% of GDP in Haiti. As a result, the diaspora presents an
opportunity for financing; by some estimates the diaspora is equal to 25% of the region’s
population, with savings equal to one-quarter of the region’s GDP. Most of these savings are
invested in diaspora host countries. These savings are an opportunity for Caribbean countries.
India and Israel are two countries that have raised funds from the diaspora at a lower interest rate
than possible from foreign investors, due to a patriotic discount.
Diaspora investors gain satisfaction from helping their country, especially when the bonds are
attached to a specific project. An example of opportunity would be the Surinamese diaspora in
the Netherlands. At current rates, Suriname would need to raise financing at 7.5% interest; but,
with a patriotic discount, the rate would be estimated at 5%. Jamaica, Guyana, Haiti and Trinidad
and Tobago are other Caribbean countries with a strong potential for diaspora financing.
3. Comments by discussants
Mr. Ransford Smith
The SDG process provides a window of opportunity to decide what to do in the future. Financing
is the challenge: the region should push for more assistance in the SDG framework, as the
Caribbean has too much debt and insufficient fiscal space. Diaspora bonds are an interesting
opportunity. Developing countries can also help to fund their development through increasing
contributions to development banks. The region should seek to institute national programmes
which encourage increased savings by its citizens, which in turn would provide funds for
investments.
Mr. Compton Bourne
The challenges faced by the region are: inadequate funds for long-term investment; insufficient
concordance between supply and demand of funds for investment; and high foreign debt
payments. The restriction of access to aid based on per capita GDP is a challenge for the
Caribbean. The international community needs renewed focus on the Caribbean taking into
account its peculiar economic vulnerability. It is also important to foster social stability and
reduce crime. The international community should increasingly channel resources through
regional development banks and strengthen their risk management capacity. The prospects for
sovereign bonds need to be improved, as the risk premium for Caribbean bonds has increased.
With regard to the issue of debt relief, it is noteworthy that the Caribbean’s high dept absorbs
foreign exchange earnings. It is unlikely that there can substantive development with the region
unless its debt overhang is significantly reduced.
4. Questions, Answers and Comments
Diaspora funds need to be leveraged one country at a time, with one country being a first mover.
In countries with diaspora bonds, the bonds are usually held to maturity and not traded on a
secondary market, as these are very new instruments.
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With regard to the middle income status-access to concessional financing dilemma, we need to
look not only income per capita but a country’s ability to mobilize finances, debt ratios,
vulnerability to shocks and its social challenges. This provides a more complete picture of what
instruments are needed. We need a new jubilee debt relief movement for the Caribbean.
The needs of the Caribbean people need to be considered when discussing policy, developing
green economy solutions and to implementing practical finance solutions for development. The
preferences of the diaspora need to be respected in developing diaspora bonds.
5. Action Points
ECLAC will:
• Advocate for a broader set of criteria to address the access of Caribbean SIDS access to
concessional finance based on vulnerability criteria rather than gross national income.
• Advocate on behalf of Caribbean SIDS to seek debt reduction which will create fiscal
space which will allow them to pursue sustainable development and continue to help
member states to improve their fiscal management.
• Expand its role in capacity building among member states to improve the response to
losses from external events and advocate for more secure access to international finance
to address this challenge.
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