Regional IMF/World BANK Governor Calls for Coordinated Monetary Responses to Support Global Financial Sector Stability
Governor of the World Bank and the International Monetary Fund for Dominica the Honourable Rosamund Edwards appeals for an increased multilateral approach to surveillance and coordinated policy responses to reignite private sector confidence and to support the stability of the international financial system.
“We support concerted multilateral efforts to nurture the recovery, through policies that bolster private sector confidence and enhance financial sector resilience,” the Governor said in a presentation on behalf of the Joint Caribbean Group to the recently-concluded IMF/World Bank Annual meetings.
Edwards noted that the fragile conditions of the region’s trading partners underscored a sombre medium-term outlook for the Caribbean and recommended heightened policy dialogue with the world’s two leading financial institutions.
He reiterated the Caribbean’s commitment to fiscal prudence but advised that in order to meet debt consolidation objectives, economic growth at a more rapid pace was necessary.
But according to the Governor, these growth prospects remained subdued, given the impact of the vulnerabilities in the advanced countries and spillovers from persistent uncertainty in global financial markets.
He acknowledged that while there were a few bright spots as it related to economic recovery in the region, the medium-term growth prospects remained depressed and inferior to those projected before the global recession.
“Moderate prospects for tourism and remittances inflows, owing to weaknesses in the United States and the European Trading partners explain this cautious optimism,” Edwards observed. He reinforced this muted forecast by referring to what he called the “timid” increases in foreign direct investments.
On a slightly more positive note, Rosamund pointed to a recovery in commodity prices, resulting in strong improvements in some countries’ exports. But there is a downside to this recovery, as he pointed out, in that that rising commodity prices could worsen inflationary pressures for some Caribbean economies.
“On the whole downside risks are persistent and rising given the soft patch in global recovery,” he opined.
Against this dismal background, the Governor said that it was important that Caribbean nations achieve more sustainable fiscal policies and more resilient financial sectors.
And according to him, a well defined strategy to enhance economic growth and stimulate employment is equally as critical.
“As we renew our efforts to rebuild policy buffers and reduce debt, we are therefore seeking out space within our budgetary envelopes to sustain growth-promoting investments,” he stated.
The Governor also pledged the region’s commitment to pursing and strengthening initiatives to diversify its export markets, increase workforce productivity and enhance external competitiveness.
Speaking specifically about the financial services sector, the Governor indicated that the region was working towards rehabilitating the balance sheets of banks and laying the foundation for more comprehensive regulation of both the banking and non-banking sectors.
He reiterated that the Caribbean was building on the lessons learnt from the regional cross-border crisis which originated in the insurance sector and on strengthening cooperative oversight mechanisms.
“We are determined….to ensure that the resolution frameworks which emerge minimise future risk”, he assured.
But to ably respond to the many challenges, the Governor acknowledged that the region required increased technical and financial assistance from the IMF.
Noting that the Caribbean Regional Technical Assistance Centre (CARTAC) was providing the necessary technical help to the region, he lamented the Fund’s policy to charge the Centre for administrative and quality control services. He therefore called on the IMF to increase the funding made available for the technical assistance programme.
While commending the Fund for concessional financing to regional countries with high debt burdens in particular, he questioned the limited quotas extended to small states.
“...the limited quotas of our smallest states translate into insignificant access limits in nominal terms and in comparison with the amounts that would be necessary to make a difference in signalling and outcomes,” the Governor asserted. He said a reform of this policy was therefore necessary.
Turning to the initiatives of the World Bank, Edwards lauded the institution for its efforts at tackling climate change, noting that the Caribbean was particularly vulnerable to the adverse fall-outs from this phenomenon. He said, however, that there was still a lot of work to be done by the Bank in this area, explaining that “progress would only be achieved when mitigating actions are more multiplied throughout the globe”.