Caribbean Development Bank (CBD) President Dr Hyginus ‘Gene’ Leon has proposed that the US $ 2.5 billion in Special Drawing Rights (SDRs) available to Caribbean countries from the International Monetary Fund (IMF) ) be pooled to unlock even more funding in the capital markets.
Dr. Leon also expressed his intention to present a proposal to the heads of the Caribbean Community (CARICOM) on a financial mechanism to achieve this goal.
Speaking at the second edition of the Bank President’s Discussion Forum yesterday, with special guest of the Prime Minister of Barbados Mia Mottley, the BDC President said that the combination of recent SDR allocations awarded by the IMF could be the practical and powerful collaboration needed to improve the economic situation. of the region.
The SDR is an international interest-bearing reserve asset created by the IMF. Members can use their SDR allocation to supplement or build up their national reserves instead of accumulating debt.
In August 2021, the IMF implemented its largest general allocation to date of SDR 456 billion (US $ 650 billion) to meet global needs in the aftermath of the COVID-19 crisis.
Dr Leon, who has worked with the IMF for more than two decades, noted that member countries borrowing from the CBD collectively have around SDR 1.7 billion allocated to them. He said that instead of each country taking and using its own allocation, a more efficient solution would be a combined financial instrument for the benefit of the Region.
“Alternatively, we have the opportunity to say: ‘what if we pool all these 1.7 billion SDRs – [about] 2.5 billion US dollars, and invest it now in an equivalent reserve asset type instrument that could be issued by a CDB? ” he stated.
He explained how this financial instrument could then be used in turn to energize capital markets and access more and better financing for the development needs of the Caribbean.
“This could now be used through the higher rating and a closer link to capital markets to now energize an influx of that same capital that we talked about before. You can perhaps immediately think of a pool of funds of up to US $ 5 billion or even more that could be used to help drive this development agenda we are talking about, ”he added.
Prime Minister Mottley urged the CBD to move the proposal forward quickly, stressing that many countries are currently making decisions on how they will use their SDR allocations.
“We’re definitely going to sit down with you and take a look at it because I’ve argued over the last few years that we need to use what we have to unlock other funding. So, I would like to invite you to put something before the [CARICOM] Head over as soon as possible and let’s discuss it, because quite frankly a number of countries are now deciding how they use their SDRs, ”Mottley said.
She explained how Barbados plans to use its SDR allocation, adding: “I wish I could use ours in a way that has a significant legacy – Barbados argued that we want to be able to get into science. life. …. When you look at the number of people we’ve produced at the University of the West Indies over the past five years, that’s about 6,000 people. [who have graduated] in science and where did they go? They are not doing the higher value kind of things that they would like to do if we were in a larger economic space.
The CBD President stressed the importance for the Region to work together to maximize the benefits of their SDR allocations, stressing that we could be if we were to pool and now use these SDRs through the mechanism of ‘leverage in a way that helps build the very capital markets we say we don’t have. But that calls for collaboration, for cooperation in the regional sense.
The President’s Chat is a chat program that the CBD launched earlier this year to promote a high-level dialogue on issues of regional importance between the President of the Bank and opinion leaders and policy makers. The Governor of the Eastern Caribbean Central Bank, Timothy Antoine, moderated the last edition.