Government will make a decision in the coming weeks on whether it will tap into the International Monetary Fund’s recently established Resilience and Sustainability Trust (RST).
Prime Minister Mia Amor Mottley reiterated this message on Friday as she participated in a hybrid panel discussion on Building Resilience and Sustainability in the Caribbean. The other panelists were Deputy Prime Minister of Canada, Chrystia Freeland, who joined virtually, and the Managing Director of the IMF, Kristalina Georgieva.
Ms. Mottley shared Barbados’ plans in response to a question from moderator of the discussion, Finance Minister of Jamaica, Nigel Clarke. She said: “The short answer, the country is going to have the conversation in the next few weeks. Long answer, we have very little choices available to us…. The RST will require of us some level of engagement with the IMF, and yesterday marked the end of the last Board meeting for Barbados in a four-year IMF programme….
“So, the country has to go through that process…. But what is good is that the instruments the IMF has, are not only instruments that relate to more debt being incurred, and therefore there are policy-based instruments. Given the fact that we’ve done a lot of the policy work already, it’s not a far walk for us to do with respect to wanting to unlock the equivalent of what would be 210 million US dollars…, which represents just under four per cent of GDP, probably at the end of this year.”
The RST is expected to help countries build resilience to external shocks and ensure sustainable growth, contributing to their long-term balance of payments stability. The loans will have a 20-year maturity and a 10½-year grace period. Low-income countries, developing and vulnerable small states, and lower middle-income countries will now be eligible for that affordable financing from the Trust.
The RST will complement the IMF’s existing lending toolkit. It will channel Special Drawing Rights (SDRs) contributed by countries with strong external positions to countries where the needs are greatest.
Ms. Mottley thanked those countries, including Canada, for contributing to the Trust. However, she stressed that more funds would be needed urgently because the timeline within which countries have to spend the money for adaptation is short.
“We recognise that the private sector has no interest in adaptation because there’s no rate of return. And if the IMF Resilience and Sustainability Trust is the only game in town, funding at concessional rates for middle income countries’ adaptation, then that is a message I have to carry to my people in Barbados….
“The RST is not only about climate; the RST is also about the pandemics…. So, the RST provides that opportunity for us to be able to access funding that will help us in two of the three wars – the war against the pandemic and against climate,” the Prime Minister told her audience.
Managing Director Georgieva said the target for the Trust is $45 billion and the Fund had already received pledges of around $40 billion.
“We will be starting commitments to countries from October…. In the meanwhile, we are collecting the pledges, putting the infrastructure (in place, that is) how we are securing this fund money to not get lost. And we are also rapidly preparing ourselves to work with other institutions, so when we engage with the country, it is on a foundation already there for climate action,” she explained.
Ms. Georgieva urged the Caribbean to lead the way and tap into the funds.
Deputy Prime Minister Freeland said Canada had contributed $2.44 billion to the RST, which she stated was a facility her country believes in and championed.
She expressed the view that it was necessary to develop initiatives to assist middle income countries. “So, I am glad that the RST exists. Canada has been glad to kind of help get it there, and we’ve been very glad to contribute to it,” she stated.
Ms. Freeland suggested that Caribbean leaders could play a leadership role by making the new facility work. “Nothing succeeds like success. Nothing succeeds like you guys having really great policies that will build that long term resilience, that when you put them in place, people can look at them and say, wow, this is a fantastic investment. And we can see how 10 years from now it’s going to make this country, this region, the whole world much stronger,” she said.