The IMF, World Bank and G-7 are driving the Caribbean into debt and poverty

By Carlton Joseph

Carlton Joseph

Last week the International Monetary Fund (IMF) warned Caribbean countries that, because of their high debt and low growth, they face an uphill battle fighting the debt crisis that has them in a stranglehold.  The report indicated that the average debt was 79 percent of Gross Domestic Product (GDP), that is, the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.

Interestingly, the IMF did not acknowledge its role in placing these countries in their predicament by imposing Structural Adjustment Policies (SAP), which forced these countries to lower the standard of living of their people, by reducing spending on healthcare, education and development, and selling off their assets cheaply, to ensure debt repayment to the developed countries and loan holders. 

Worst, the preconditions for the loan were that countries had to accept liberalization of their economy and resource extraction/export-oriented open markets, privatization and reduced protection for domestic industries, currency devaluation, increased interest rates, flexibility of the labor market, and the elimination of most subsidies.  Also significant, the role of the state in the economy was minimized.

The impact of these policies has been devastating to the Caribbean and developing countries because they were forced into the global market place before they were economically and socially stable, and their infant industries were incapable of competing with the multinational companies.  Their indebtedness became worst because they produced similar cash crops, raw materials, and commodities, and were forced to export more to earn foreign exchange to pay off their debts. The glut in the market resulted in price wars that made their exports cheaper thereby reducing the amount of foreign exchange they could earn. It resulted in them not being able to service their debt, or keep their currencies stable.  This benefitted the developed countries and accelerated the race to the bottom for the developing countries.

At the meeting, CARICOM Secretary-General, Dr. Carla Barnett addressed climate justice saying, “we either cannot adapt or have not adapted, because such adaptation requires access to funding – funding which should be provided, in the interest of justice, by developed countries who are responsible for the destructive impacts we now face”.  The Caribbean community residing in the G-7 countries must organize to force these countries into provide funding to address the impacts of climate change in the Caribbean.  Expatriates must organize because all Caribbean countries are among the top 50 disaster prone countries in the world, and six Eastern Caribbean Currency Union (ECCU) countries are in the top ten.

Caribbean nations are small economies, highly exposed to natural disasters and economic shocks, and because of IMF and World Bank policies, wide open to international trade.  Except for Trinidad and Tobago and recently Guyana, who export petroleum gas and oils and mining products, and Jamaica’s Bauxite, the main exports from the Caribbean are bananas, sugar and rum.  However, for most countries, tourism is the driving force in terms of revenue generation, employment and economic wellbeing.  

Predictably, the US reports that the Caribbean’s strong interest in U.S. products is mainly due to close proximity, long-standing reputation of high-quality products, and superior quality of service, and acknowledge that local competitors are not able to match their U.S. counterparts in terms of product quality and reliability.  When one considers the impact of American television shows, superior marketing and advertisements, it is no surprise that the U.S. is the largest supplier of food products to the Caribbean.

The Caribbean is also contributing to its demise by importing food to feed its population.  Blessed with sunshine all year; making it possible to farm all year, and land that is fertile for agricultural exports, it is ridiculous that the total agricultural imports from the US in 2021 totaled $4.4 billion and Euromonitor predicts that it will be US$7 billion in 2022.  When one considers the different currency exchange rates in the region, it is clear that many of these countries will have debt that will be considered either substantial risk, extremely speculative or in default. 

Caribbean nations must redirect their economies toward domestic production and food sovereignty, in order to feed their people and escape the debt and poverty trap.  Food is central to people’s development throughout their lives; exporting cheap commodities and importing finished products, that cost more than the revenue you receive for your products, destroys your economies. US Census Bureau for 2020 show that CARICOM goods imports were valued at US$10 billion, while exports were valued at US$4.41 billion, when you factor in currency rates, inflation and debt interest rates, these countries will never be able to repay their debts.  Eventually, this imbalance of trade expands and makes permanent the gap between rich and poor countries.  Continuing to accept structural adjustment programs will ensure our poverty and dependency, to quote calypsonian Shadow: “Poverty is hell”.  

Added to this toxic mix of climate disasters and debt, recent reports claim that because of their middle-income status, only a few Caribbean countries qualify for concessional borrowing at the World Bank.  Interestingly, an IMF report blames strong trade unions for the high wages in these countries.  Are they now going to impose banning trade unions to reduce labor costs and further impoverish our people?

The situation is dire, since the beginning of the year fast rising interest rates have been increasing borrowing costs, and G-7 Central Banks are raising interest rates to curb inflation.  Economic uncertainty and fear of a global recession are causing investors to withdraw funds from markets perceived to have higher risks, the consequences for the Caribbean and developing economies have been rapidly rising interest rates and depreciating currencies, adding further to debt burdens and already high inflation.

Finally, natural disasters, successive years of fiscal deficit, public enterprise borrowing and off-balance-sheet spending, including for financial sector bailouts, all contributed to high debt.  The last rapid growth in the 1980’s was fueled mainly by expansion of tourism, banana production, and public investments; deterioration began in the 1990’s with the loss of trade preferences, devaluation of currencies, and emigration of skilled labor because governments were forced to sell off industrial assets.

The IMF, WORLD Bank and G-7 must be held accountable for the decisions they made to push these countries into debt with their structural adjustment programs, in fact, they continue pushing the same failed strategy today.  Caribbean nationals residing in the US and Canada must pressure these governments into acknowledging their role in creating these conditions in the Caribbean, and through our vote, or lobbying organizations, advance proposals to effect policy changes that would positively impact the Caribbean.

(Trinidad-born Carlton Joseph who lives in Washington DC, is a close observer of political developments in the United States.)