CARICOM discussing COVID-19 assistance with IMF
THE CARICOM GOVERNMENTS ARE in talks with the International Monetary Fund (IMF) concerning monetary assistance in the face of the economy being hit hard by the fallout from the COVID-19 pandemic.
Prime Minister Dr Ralph Gonsalves and Minister of Finance Camillo Gonsalves expounded on the efforts that are underway, while at a press conference on Tuesday, March 17.
They discussed how hard the economy will be hit, the Finance Minister noting that for many Caribbean countries the GDP (Gross Domestic Product) is at least one third dependent on tourism.
He commented that the fall off, which has already begun, is projected to be significant and estimates range from a 20% to 85% fall off in tourism. Therefore, it would follow that the economy would be significantly negatively impacted.
A meeting was therefore held on Monday, with the IMF western hemisphere department director, Alejandro Werner.
There is already available one source of money from the IMF, in the form of their flexible and rapid disbursing emergency response tool kit which is to help countries with an “urgent balance of payment needs,” the Prime Minister had indicated, such as one created by the loss in tourism income by COVID-19.
The Finance Minister said that the IMF has conceded that the rapid finance instrument can be used in the context of the COVID-19 pandemic, although its usual use is in the wake of natural disasters.
The facility, which would allow money to be made available almost immediately in the case of a disaster, is available at zero per cent interest, with repayment over 10 years, in the case of St Vincent and the Grenadines (SVG).
The finance minister admitted that SVG drew down on the instrument in 2013, at the time of the floods, and the state is still repaying this money.
He said the amount of money available for SVG under this facility is only 12 or 13 million dollars. “It is essentially pinned to the size of your economy. So if you have a small economy, you have a small quota,” the finance minister explained.
He said the government indicated to them that, “We’re grateful that the IMF will consider the
Rapid Financing Instrument in the context of the COVID pandemic – that’s good. But the IMF must also consider increasing the quota to small island developing states.”
He continued that this was in light of the seriousness of the fallout associated with the pandemic, and that Caribbean countries are going to be very hard hit.
Further, they raised the point that there is a possibility of a case where two crises “dovetail” because “You have the COVID pandemic which is still increasing in our region, has not yet peaked in our region, leading into hurricane season, and if God forbid, our country or one of our neighbours was struck by a hurricane during the hurricane season, while dealing with the COVID pandemic, a 12 million US dollar draw down won’t cut it.”
In addition, the Prime Minister spoke about the Catastrophic Containment and Relief Fund which was created as a response to the Ebola crisis in Sub-Saharan Africa and is targeted at providing assistance to African countries.
That fund has an income cut off, so if average incomes in a country are more than a certain amount, the country does not qualify, the minister said.
He considered that probably only Haiti might be able to benefit from that fund as it is now.
The IMF “Designed it with Africa in mind but now that we have public health challenges outside of Africa, in developing countries that also need this debt relief,” he continued.
The Government expects that the head of the Western Affairs will “carry on that conversation” with the head of the IMF, as he committed to doing so. The Prime Minister of Barbados, Mia Mottley, has also undertaken to further the argument “at the highest levels of the IMF.”