BRIDGETOWN, Barbados, CMC – A senior official of the International Monetary Fund (IMF) Monday said the first economic policy for Caribbean countries hard hit by the coronavirus (COVID-19) is to improve health conditions and “for that, we need to accelerate vaccination campaigns to bring the pandemic under control.
Nigel Chalk (File Photo)“Increased access to vaccination would save lives, prevent new variants from emerging, and hasten the recovery,” Nigel Chalk, the acting Director in the IMF’s Western Hemisphere Department.
In an exclusive interview with the Caribbean Media Corporation (CMC), Chalk, said the next economic policy priorities are to support the recovery, create employment opportunities, and provide well-targeted spending on social protection, particularly for those hit most hard, lower income groups, women and the young.
“To bolster credibility, spending in these areas will need to couched within a transparent medium-term fiscal framework and, in some cases, will need to be offset by greater efficiency of spending in other areas and perhaps some rethinking of the scope of government activities,” Chalk said as he offered guidance to regional countries in terms of ensuring that their policies do not provide further hardship on their populations as a result of the COVID-19 pandemic.
He agreed that the “pandemic has hit hard the population in many countries” given that the economies of many Caribbean countries are highly dependent on tourism and are currently sorting out the appropriate timing and scale of unwinding the extraordinary COVID-19 fiscal and monetary measures.
Across the region, governments’ fiscal actions included the provision of tax cuts, tax deferrals and grants to households and businesses as well as direct funding for health infrastructure and medical equipment and personnel. But these policies come at a price to economic stability and the pandemic is still around even though vaccines are available.
Asked whether he foresees regional countries continuing with such policies and if they do, for how long, Chalk told CMC that in the midst of the pandemic, countries needed to think fast and act fast. “But many of the interventions and relief measures they introduced should be regarded as emergency policies that will now need to be phased out.
“Given the more-protracted-than-expected duration of the pandemic, several countries are extending some of these interventions, and a few, Grenada, St. Kitts and Nevis, St. Lucia, are also rolling out new programs.”
He said that these include support to companies in the tourism sector that have been hit particularly hard as well as employment programs as in Barbados, Grenada, income support to workers and households in The Bahamas, Grenada, Guyana, St. Kitts and Nevis, St. Lucia, payroll subsidies to businesses in Curaçao and Sint Maarten as well as tax reductions or concessions in the Bahamas, Guyana, Jamaica, St. Kitts and Nevis.
In addition, the IMF official said that tax credits or waivers to small medium enterprises (SMEs) in Jamaica, St. Kitts and Nevis, credit support for SMEs in Grenada, and health sector spending in The Bahamas, St. Lucia.
“Some of these measures may need to be in place even until end-2022 when hopefully the pandemic will be well under control in the region,” Chalk told CMC.
Chalk said that energy and food prices have risen sharply in 2021 by approximately 82 and 28 per cent noting that Caribbean countries are still facing high debt and pleading for concessions as they seek to survive in the near and even medium term.
Chalk said that the increase in energy and food prices which together with supply chain disruptions and stronger aggregate demand, has led to higher inflation across the globe.
“We should not underestimate the burden this inflation places on poor households and the most vulnerable may well need some additional support until these price pressures pass through the system.
“However, the flip side is that in part this inflation is being driven by a strong rebound in the global economy. This should benefit the Caribbean including through increased inflows of money from exports, tourism and remittances. For those that have borne a particularly heavy burden, the IMF is ready to provide help and, indeed, the recent SDR (special drawing rights) allocation provided US$2.4 billion of condition-free, debt-free resources to the Caribbean,” he said.
The IMF official during the wide-ranging interview also commented on the move by some regional financial institutions to relax some criteria for loan classification and amended the treatment of non-performing loans even as there continues to be a great need for heightened monitoring of financial institutions in order to ascertain “true” changes in asset quality, profitability, liquidity and solvency.
“The implications of the COVID crisis on the balance sheets of financial institutions feature prominently in the engagement between IMF staff and the Caribbean authorities. IMF staff has been exchanging views with the Caribbean countries at the national and regional levels, including regarding supervisory initiatives including enhanced monitoring, contingency planning, and efforts to tackle a potential increase of troubled assets.
“We have also been providing information on the experiences of other countries, some of which are already phasing out some of the changes in regulatory classifications and loan moratoria. The IMF stands ready to provide advice as countries unwind COVID measures and work to assess the true picture of bank balance sheets,” the IMF official told CMC.
