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Press Release: IMF and Caribbean Officials Discuss Uneven Economic Outlook, Strategies to Tackle Energy Challenge and Financial Sector Issues in the Caribbean

Press Release No. 15/402 September 4, 2015

Caribbean economic officials and the International Monetary Fund (IMF) discussed possible strategies to help boost long term growth in the region, focusing in particular on the uncertain global environment and strategies to address the high cost of energy and strengthen the financial sector. The discussions were held at a high-level forum on “Financing Growth” that included finance ministers, central bank governors from the Caribbean and officials from the IMF, the World Bank, the Inter-American Development Bank, the Caribbean Development Bank and donors. The event was jointly organized with the Government of St. Kitts and Nevis and the Eastern Caribbean Central Bank.

At the conclusion of the Forum today, Mr. Min Zhu, Deputy Managing Director of the IMF said “the Caribbean Forum has become a key platform for us and our Caribbean partners to engage and advance solutions to foster economic growth in the region. Responding to the priorities set by the Caribbean authorities at last year’s Forum we have focused our attention on the challenges posed by the mixed near term outlook for the region, addressing the high costs of energy and financial sector issues including access to credit.”

Short term outlook

Participants welcomed the return to growth but recognized that it remains fragile and uneven, and discussed policy responses in the face of the uncertain international environment. The tightening of US monetary policy will make debt more expensive and deepen the Caribbean’s competitiveness disadvantage. In this context, the IMF encouraged authorities to seize this moment of increasing growth and low oil prices, to strengthen fiscal buffers and take structural reform measures to increase the production of goods and services, raise employment, and lower the costs of doing business. These actions are needed to make the Caribbean more attractive for FDI and raise potential output. 

Meeting the energy challenge

Participants agreed that reducing the energy bill could have a significant impact on growth even if it would not constitute a magic bullet, given that other external factors affect growth even more. In this respect the national energy plans being currently implemented in line with CARICOM’s regional strategy would generate important savings. Preliminary estimates suggest that whilst the average cost for countries in the region to fully execute their energy strategy is substantial, it is not insurmountable. Participants highlighted the value of private sector investment in the strategies given the fiscal constraints in some countries.

Banking sector issues

Participants highlighted that much progress has been made to strengthen the banking sector in the region. However, the work is not finished and some new problems have arisen.

Credit to the productive sector remains muted, and de-risking by global banks is affecting correspondent banking relationships in a number of developing and emerging market economies. Policymakers called on the Fund to work with the international financial community to find a way forward. There were clear recommendations from panelists about access to credit, including the need to improve information sharing as well as strengthening, enforcing, and harmonizing creditor and property rights.

“I would like to reiterate the Fund’s commitment to the post-2015 Development Agenda. We are working to develop our policy advice to small states to support improvements in growth, resilience to natural disasters, and environmental sustainability. Finally, I would like to express my sincere gratitude to Prime Minister Harris and Governor Venner for co-hosting the event,” Mr. Zhu concluded.

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