Robust regional growth must be built on several key pillars

President of the Caribbean Development Bank (CDB), Dr. Warren Smith, believes that there are some key pillars upon which a robust regional growth agenda can be built.

Addressing the 2013 High Level Caribbean Forum “Building Growth Into The Caribbean Sustainability”, last week Thursday in The Bahamas, he outlined that the first of these pillars is macro-economic stability, undergirded by sound fiscal policy; transparent and enforceable fiscal rules; and a monetary policy which is consistent with low inflation and a competitive exchange rate.

He said that the second pillar is a prudent public investment strategy, targeting projects which provide an acceptable economic and social rate of return.

“This strategy should be aligned with the goal of providing infrastructure which lowers the transaction cost of doing business, produces an appropriately skilled labour force, and optimises the use of domestic savings.

“Furthermore, in support of an appropriate public investment strategy should be an effective public debt management strategy and capacity. The emphasis here is on appropriately balancing the mix and tenor of local and foreign borrowings whilst maintaining a keen eye on the critical drivers of favourable debt dynamics and prudential debt limits,” Smith indicated.

The CDB President went on to suggest that highly-indebted Caribbean Small Island Developing States, whose debt has reached unsustainable levels, must commit to and set out on the reform path outlined above, whilst vigorously and persistently making the case for access to Donor-assisted debt relief.

“The evidence from other parts of the world is indisputable that, without this, and in spite of herculean efforts, they will face extreme difficulty reversing the high debt/low growth spiral. The credibility of this case can only be built around the now widely accepted fact of the Caribbean’s peculiarly vulnerable circumstances and evidence of a demonstrated willingness to fully embrace appropriate fiscal and structural reforms.”

He further stated that the region must take lessons from the evidence that a common factor among fast growing economies is greater openness, and integration into the global economy.

“Autarchic policies will militate against rapid economic growth. Greater global integration will necessitate a judicious and progressive removal of barriers to trade, whilst encouraging investment and creating the conditions for increased productivity.

“Finally, for growth to be sustainable it must be inclusive and the benefits widely shared. Appropriate mechanisms must be in place to protect as well as empower the most vulner-able groups. And policymakers must commit to pursuing credible policies, and to engaging stakeholders early in the dialogue to solicit their support,” he added. (TL)