Press Release No. 13/349

Press Release: Private Sector, Economic Integration and Continued Reforms Key to Restoring Growth in the Caribbean

September 20, 2013

Caribbean high level officials and representatives from international and regional financial institutions gathered in Nassau, The Bahamas on the occasion of the 2013 High Level Caribbean Forum “Building Growth into the Caribbean Sustainability Agenda.” They stressed the importance of private sector led activity, furthering economic integration and continued efforts in structural reforms to kick-start growth in the region.

The Forum, a follow-up to the 2012 conference in Trinidad and Tobago on rethinking policy priorities, brought together policymakers, and officials from Antigua and Barbuda, the Bahamas, Barbados, Belize, Grenada, Guyana, Haiti, Jamaica, St. Lucia, Trinidad and Tobago, and officials from the Eastern Caribbean Central Bank. Hosted by the Government of the Bahamas, the conference was convened by the International Monetary Fund in collaboration with the Caribbean Development Bank (CDB), the Inter-American Development Bank (IDB), the International Finance Corporation (IFC) and the World Bank.

“The theme of this year’s conference is a direct response to feedback at the 2012 Forum where policymakers underscored the need for renewed growth as the necessary anchor to a viable future and to fiscal sustainability,” noted Alejandro Werner, Director of the Western Hemisphere Department at the IMF.

The Forum also responded to the request of Caribbean authorities for international financial institutions (IFIs) and other development partners to collaborate and ensure consistent policy advice so as to forge a coherent, holistic approach to reviving growth.

The summary conclusions from the Forum included:

• Macroeconomic stability and sustainability are vital prerequisites for growth. Given the need for countries with high debt to reduce their fiscal and external imbalances, the private sector must take a lead role in investment and growth.

• The Caribbean has inherent strengths and comparative advantages in key sectors that have not been fully exploited and that hold considerable potential as sources of economic growth in the near term.

• Forum participants identified important opportunities to develop private sector-led growth. The first priority for policymakers is to implement measures to enhance the business environment, such as reducing bureaucratic processes, and lower costs.

• Public private partnerships (PPPs) can play a role in raising much needed investment and funding of infrastructure projects. While the political will exists, the region will need more information on cost and benefits of PPPs, in some cases reforms to the legal frameworks, and greater effort to build consensus among key stakeholders and the public. The end goal should be to achieve the best risk sharing between public sector balance sheets and the private sector.

• Reforms to the labor market hold considerable potential: research showed that removing rigidities to wage-setting could have important positive effects on employment and growth. Aligning wages better with productivity and strengthening incentives to improve skills matches are key priorities.

• A key element in the path forward is to strengthen integration to help share and lower fixed costs, and to increase trade integration. Indeed, many of the challenges facing Caribbean countries are better suited to regional solutions, such as customs and VAT reforms, regulations for PPPs, information and communication technology (ICT) infrastructure, and aviation policies.

The IMF, together with its sister institutions, is committed to working with member governments on many of these constructive ideas. As expressed by the Right Honorable Perry Christie, Prime Minister and Minister of Finance of the Bahamas, “the IFIs and the IMF need to be flexible in their surveillance and lending operations with small states given their special characteristics and needs.”

In this respect, Deputy Managing Director Nemat Shafik reiterated that the IMF is pursuing analysis and policy work tailored specifically to the needs of small states. IMF staff will work with small states to ensure more focus on growth in their Fund-supported programs.