BRIDGETOWN, Barbados, CMC – President of the Barbados-based Caribbean Development Bank (CDB), Dr. Hyginus’ Gene’ Leon, Wednesday said. At the same time, regional countries last year experienced an improvement in economic performance. The combined impact of several years of consecutive shocks, the prospect of a slowdown in the global economy, and continued price pressures in 2023 threaten to derail its development trajectory.
But he said that in the future, there is also the need for the region’s private sector to transition from “bystanders to partners in the development space.
“This transition requires a change in mindset to reimagine traditional public-private partnerships (PPPs) as partnerships for prosperity and profits. As such, the region’s governments will need to create an enabling environment and invest in innovation such that public value propositions offer viable investment opportunities.”
Leon said that the CDB accepts the expectation of private sector-led growth, “but now we must move to personal sector-led development.
“Pursuing growth, resilience, and transformation without a definitive role for the private sector is like playing football with some of our best strikers on the bench. Now even as we lay plans to move the region’s development agenda forward, we can anticipate that 2023 will bring its challenges and surprises.”
The CDB president said that in this context, CDB continues to emphasize resilience as the primary ingredient for sustainable economies and societies.
“Key to achieving resilience is reducing our vulnerability to factors outside of our control while employing the elements within our power to achieve our development objectives,” Leon told the annual CDB news conference.
He said the onset of the coronavirus (COVID) pandemic amplified structural weaknesses in regional economies, highlighting the extent of the Caribbean’s financing need.
“We estimate that the region faced nearly US$10 billion in Gross Financing Needs (GFN) in 2020, which measures a country’s overall fiscal position, plus any funds needed to repay existing debt. Moreover, the expenditures needed to address vulnerabilities exposed by the pandemic and the resources required to achieve the Sustainable Development Goals (SDGs) suggest the resource needs of the region are much larger,” Leon said.
He said the CDB provided an average of US$300 million to its borrowing member countries (BMCs) during 2018-22, adding that with gross financing needs likely remaining elevated through 2030, the mobilization of financing inflows will continue to be critical.
Leon said that to meet the region’s financing needs and address mounting fiscal pressures, CDB recommends several initiatives, including broadening regional financial systems to create financial markets that will facilitate intra- and inter-Caribbean flows of capital geared towards mobilizing regional savings and driving a partnership with the private sector for financing our development.
In addition, the bank is strengthening public financial management and expenditure ecosystems to ensure transparency and accountability in government spending and improve linkages between governments’ strategic plans and their allocation of resources.
“In this regard, CDB strongly supports increased results-based budgeting tied to the Sustainable Development Goals (SDGs) with emphasis on the reform of the public sector chart of accounts, medium-term integrated fiscal frameworks, and the implementation of an integrated financial management information system. Through these investments, countries can engage in more proactive budgeting processes and benefit from improved spending efficiency,” Leon said.
The CDB is also advocating for a more equitable deployment of existing concessional resources, as well as providing a rationale for increasing financial resources at more concessional terms as well as supporting the rechanneling of excess Special Drawing Rights (SDRs) of advanced economies to enable the transforming and repositioning of the region’s economies.
Leon, the CDB’s sixth president, told reporters that regional cooperation and integration are urgent and crucial for the Caribbean’s post-pandemic recovery and overcoming its development challenges. Leon said the pandemic and ongoing global energy and food crises had underscored the limitations of countries working alone to combat these shocks’ impacts effectively.
“CDB is committed to enhancing regional cooperation and deepening regional integration and has determined that a core priority in promoting regional cooperation and integration will be the support for restricted public goods.
“In 2022, the bank supported several regional priorities in transport, intra-regional trade, food security, agriculture, private sector development, climate action, and renewable energy. While we have made strides, there is more work to be done in these areas and leapfrogging in other areas such as digitalization and innovation.”
Leon said given the region’s experience over the 2020-2022 period, now is the time for the Caribbean to reimagine regional cooperation and integration and what this could mean for Caribbean citizens.
He said he was calling for a renewed commitment to advance the implementation of the Caribbean Community (CARICOM) and Single Market Economy (CSME) that allows for the free movement of goods, skills, labor, and services across the region “thereby improving the lives of the region’s citizens through increasing market access for goods, services, and people; providing economies of scale; offering more significant employment and business opportunities; and • providing a platform for increased innovation and digitalization.
The St. Lucian-born economist told reporters that while transportation within the region remains “critical,” intra-regional transport declined by as much as 50 percent between 2008-20181.
“The situation is now at crisis level in the Eastern Caribbean, where the demise of LIAT in 2020 meant a loss of airlift from an average of 500 weekly flights in 2019 to 50 flights in 2022,” Leon said, adding that the CDB views dependable and cost-effective air transportation services as essential for the transformation of several of the region’s economies.
“Consequently, to safeguard the region’s future, governments need to take decisive and integrated action to reform the air transportation operating environment,” Leon said, adding that these measures should include rationalizing the regulatory environment and addressing factors that contribute to the high cost of travel, as well as elements that hinder the seamless movement of people within the region;
In addition, there is a need to promote cooperation amongst regional airlines, reduce wasteful competition, improve inter-airline connectivity, and forge a critical mass of collective will at the policy level.
Leon told reporters that another matter requiring urgent attention is how the region meets food and nutrition needs. He said recent global data from the United Nations indicate that the cost of a healthy diet is highest in Latin America and the Caribbean.
Leon said with the Caribbean currently importing more than 80 percent of the food it consumes, food sovereignty must be a critical collective objective.
“The major challenges facing the region’s agriculture sector include low productivity, inconsistent output, high vulnerability to natural hazards, and the impacts of climate change. Low competitiveness, limited ability to respond to regional and international market demands, and heavy dependence on imports to meet food and nutrition needs.”
He said to address this. The CDB recommends investing in air and maritime transport infrastructure and services to facilitate improved intra-regional trade and integration into global food markets, as well as designing and supporting the implementation of internationally recognized food safety standards to strengthen market linkages.
There is also a need to increase investment in appropriate and location-specific climate-intelligent agriculture approaches and promote agricultural insurance to reduce risks posed by climate change and natural hazard events.
“It is well known that the Caribbean is among the most climate-vulnerable regions on the planet and projections suggest our risks are likely to intensify in the coming decades,” Leon said, noting that climate-related hazards pose an ongoing threat to physical infrastructure, current and future economic activity, and the capacity to deliver social services.
He said regrettably, the United Nations Convention on Climate Change (COP27), held last November in Egypt, yielded “no firm commitments from significant carbon emitters to accelerate their decarbonization efforts.
“This has significant implications for the survival of Caribbean economies. Similarly, more progress was needed with the goal of the Glasgow Climate Pact, adopted at COP26, to double adaptation finance from 2019 levels by 2025.
“Nevertheless, CDB welcomes the significant additional pledges that were made to the Adaptation Fund, and we acknowledge the progress made by developed countries toward the US$100 billion annual climate finance goal, although this – originally targeted for 2020 – is not likely to be met until 2023 or 2024.”
Leon said the region’s premier financial institution also applauds the significant progress in establishing a new dedicated loss and damage fund for developing countries and that early implementation will be necessary for supporting efforts to achieve the SDGs.
“Since most regional economies face common climate-related threats, we need to collaborate in urging developed countries to meet the existing US$100 billion per year climate finance commitment, pressing for a new collective quantified Goal on climate finance to address constraints such as difficulties accessing available funding, uncertainty and timing of funds, and insufficient levels of concessionality.”
Leon told reporters that despite efforts over the past two decades, member states still need more energy security that is firmly rooted in an over-dependence on imported fossil fuels, which accounts for almost 80 percent of electricity generation.
“Electricity prices across most BMCs remain among the highest in the world, averaging about three times the average prices in the United States. In 2022 when oil prices increased by an average of 50 percent compared to 2019, the impact was felt by everyone, underscoring our collective need for a sustainable energy transition.”
He said that in December last year, the CDB finalized an updated Energy Sector Policy and Strategy devised to expedite the energy transition within the region.
“To enable this shift, CDB devised the Accelerated Sustainable Energy and Resilience Transition framework, better known as “ASERT,” through which we will partner with the governments of our BMCs to support the establishment of Legal and Regulatory Frameworks, policies, and programs that support renewable energy and energy efficiency, explore fiscal regimes and other measures that will expand the engagement of the local and regional private sector; and • focus research and development initiatives on renewable energy technologies more suited to the Caribbean environment,” Leon told reporters.
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