CASTRIES, St. Lucia -President of the Caribbean Development Bank (CDB), Dr. Hyginus “Gene” Leon, Tuesday said here was need for a new paradigm shift regarding the future socio-economic development of the region, pledging the Barbados-based financial institution involvement in the initiative.
CDB President, Dr. Hyginus “Gene” Leon, addressing the opening of the 53rd CDB Board of Governors meeting (CMC Photo)Addressing the 53rd annual meeting of the CDB Board of Governors, Leon acknowledged that the bank’s borrowing member countries (BMC) are being challenged like never before.
He said the advent of a one-in-100 year COVID-19 pandemic layered on existing economic and environmental vulnerabilities, plus the war in Ukraine, thrust the world into a period of geopolitical realignment, supply disruptions, food and energy insecurity and volatile financial markets.
“These shocks led to sharp declines in output, eroded some of the socio-economic gains made in past years and further slowed the region’s progress towards the attainment of the Sustainable Development Goals (SDGs),” Leon said, adding “they have also contributed to rising debt levels, the erosion of fiscal space and increased inequality and poverty levels”.
He said equally concerning is the global trend towards fragmentation into distinct economic blocks with different ideologies, political systems, technology standards, cross-border payment systems and reserve currencies.
“This potentially exposes the region to additional risks as fractures in the flow of capital, goods, services and technology across borders could add to inflationary pressures, eliminate jobs and deprive people of food, medicine and other essentials.
“In other words, fragmentation could result in another supply side shock leading to sharper increases in prices and less output. These difficult circumstances have increased the development challenges in the region.”
The St. Lucian-born economist said to better address the challenges of BMCs, the region’s premier financial institution recognized that it must re-imagine its approach to development, saying “we needed a paradigm shift”.
He said at a basic level, this shift began with the bank’s understanding of development and that it pivoted the understanding of development to promote a holistic systems approach, where productive and institutional capacity, environmental sustainability, social resilience, and financial affordability are seen as essential components of the evolution of the system.
“While implementation at a point in time may be specific, each part must be located within the systemic picture over time. In other words, we cannot leave any part behind. “
Leon said the bank remains cognizant of the fact that headwinds remain, as growth in the Caribbean is expected to moderate when tourism returns to pre-pandemic levels. He said tighter global financial conditions could make it harder to finance fiscal deficits and rollover debt. Additionally, the threat of climate related disasters may cause large economic and social losses and weaken economic activity.
“Nevertheless, we will remain steadfast and single minded in our aspiration to accelerate the pace of economic activity, close the gap to achieving the SDGs, and fundamentally alter the development path to place countries on a higher and more sustainable welfare path in the future by building internal resilience capacity.”
He said that the region can frame its thinking about building internal resilience capacity as a trilogy comprising: refining the international development paradigm, building partnerships and strengthening policies.
Leon said that the first part of the trilogy is refining the international development paradigm, adding “we need to measure better to target better.
“So, let us agree that the use of Gross National Product/Income as a proxy for development is insufficient and therefore our usual set of policies to grow Gross Domestic Project (GDP) will also be insufficient.
“Let us agree that in a world with a multiplicity of shocks, sustainability remains a dream unless we can conquer resilience. Let us agree to advance the global development agenda by adopting beyond-GDP measures, like the UN’s Multidimensional Vulnerability Index (MVI) as our guideposts and by extension a broad GDP, vulnerability, and resilience policy tool to target improving internal resilience capacity of a country, and thereby its sustainable development. “
The CDB President said that many stakeholders are proposing specific institutional reforms to make international development assistance and climate finance architectures more suitable for the 21st century.
He said that a prominent example is the Bridgetown Initiative that is being led by Barbados which is seeking to reform the way rich countries finance poor countries in a climate crisis
Barbados Prime Minister Mia Mottley says rich countries are able to borrow at interest rates of between one and four per cent, while it’s around 14 per cent for poorer countries.
The Bridgetown Initiative is also being compared to the Marshall Plan of 1948, when the United States provided more than US$13 billion of foreign aid to help Western Europe recover after World War II.,
Leon said that to complement the Bridgetown Initiative the CDB is exploring new and innovative ways to shape how concessional financial assistance is allocated, including through the MVI/Internal Resilience Capacity/Recovery Duration Adjudicator framework.
He said multilateral development banks, including the CDB, were also designated as prescribed holders of Special Drawing Rights (SDRs) by the International Monetary Fund and can use these SDRs for loans, swaps, pledges in exchange for currency or settling financial obligations, among other purposes.
“There are also efforts underway to establish a more robust architecture to address vulnerable countries’ Loss & Damage (L&D) needs, including through the Santiago Network and the new L&D fund that United Nations Framework Convention on Climate Change (UNFCCC) Parties agreed to establish at COP27. “
Leon said that the second part of the trilogy would involve partnerships, noting that accelerated sustainable development requires partnerships for development between the private sector, government and the international community.
“In fact, I have repeatedly said that Sustainable Development is too important for it to be the exclusive purview of government. Let us agree we need to share to grow – sharing opportunities, burdens, and responsibilities.
“Partnerships should take place at various levels: partnerships among multilateral financial institutions -let’s use financial partnerships to effect scale along thematic lines for example a green, just energy transition – that goes beyond national/continental boundaries.”
He said regional and external associates can also pursue partnerships in knowledge creation – sharing technology to improve global productivity; and focusing on national goals that can be effectively delivered through complementarities and synergies between private and public sectors, breaking trust barriers and unifying a focus on country prosperity.
“Partnerships can also occur in capacity building. For example, we can re-imagine our learning systems and develop centers of excellence through using technology to bridge skills gaps across Caribbean islands particularly in new and emerging areas such as animation and gaming, robotics, digital media and Green Engineering.
“This can expand skills sets and create jobs and business opportunities particularly for the youth and help to mitigate some of the outward migration of our best and brightest young people.”
The CDB President said that the third part of the trilogy is policies, adding “we need policies and supporting instruments that are designed to drive fit-for-purpose investment activities, enhance implementation capacity for building resilience and increase access to adequate and affordable financing for investments.
“I want to focus on the financing aspect. It includes creating policies and designing instruments geared toward developing a resourcing ecosystem that provides liquidity for rescue, for recovery, and for repositioning based on need, not only on GDP.
“Examples include: contingent disaster financing instruments …contingent debt instruments to cushion the effect of an exogenous shock, instruments for mobilizing and intermediating private sector financing for development, revisiting debt sustainability frameworks to incorporate a wide class of debt clauses, exploring guarantees to enhance the quality of the portfolio, and expanding insurance instruments to facilitate resilience.
“Let us agree we need a suite of instruments and affordable financing, with appropriate governance frameworks, to customize our varying needs and deliver on the promise of resilient prosperity for all,” he told the opening ceremony.
He said the CDB has a special role to play in navigating these challenging times, promising that the bank will relentlessly pursue its ambitious agenda to build internal resilience capacity in the BMCs using the trilogy of improving the international development paradigm, building partnerships, and strengthening policies.
“However, our efforts alone will not take us over the finish line. We request your continued and unwavering support as we are determined to introduce and execute novel and innovative approaches to support our membership.
“We will continue to demonstrate unmatched resilience and improved responsiveness as the region’s development bank as we remain true to our mandate of transforming Caribbean societies and committed to safeguarding the vision of resilient prosperity,” Leon said, adding” the fate of the region and the bank are inextricably linked.
“When the region succeeds, the CDB succeeds. It is, therefore, in our collective interest to work together.”
