Portia’s UN Call For Debt Relief

News post August 2, 2015

Published: Sunday | August 2, 2015 Ian Boyne, Contributor

Prime Minister Portia Simpson

Prime Minister Portia Simpson Miller was on target to make the link at the United Nations (UN) Security Council between transnational crime, drug trafficking and development. Her call for multilateral debt relief in the context of discussing security issues was bang on.

Jamaicans generally react viscerally and parochially to any call for debt relief. It is framed as irresponsible, reckless, diversionary – an appalling example of our mendicancy. Well, that’s an example of our ignorance of development issues. Apart from geography, we are not an island unto ourselves. We are a part of an interdependent world where, especially as a small island developing state (SIDS), we are severely impacted by forces outside our control.

Despite our best efforts, irrespective of how fiscally responsible we are and how well we govern ourselves, our economy is seriously constrained by factors over which we have little control. We have some issues which stubbornly remain, whoever is in Jamaica House. We can elect whomever we want whenever the election is called, there will be certain things going down over which they have no control.

The World Trade Organization has said in its latest annual report that global trade is set for at least another two years of disappointing growth. For three decades before the global recession of 2008, world trade grew at twice the rate of global gross domestic product (GDP). Now world trade is growing below world GDP. The World Bank and the International Monetary Fund (IMF) are projecting lower-than-earlier forecasts for growth. We did not contribute one bit to the global economic crisis, but we have suffered dearly for it. And the commitments which developed counties made with regard to official development assistance have not been kept.

 

Concessionary Arrangements

They can tell us to put our house in order all they want – and it is in our interest to do so – but that does not mean they have no interest in facilitating our development through concessionary arrangements and by pushing for global trade and economic reforms. If the post-2015 development agenda is to be pursued, developing countries will have to have a favourable external environment. Fiscal consolidation will not be enough to work the magic. Our prime minister was on point at the UN Security Council last Thursday.

“The classical and relatively narrow concept of peace and security cannot be neatly applied to the multifaceted security threats that confront SIDS,”.

She told the security council, “Small island developing states such as Jamaica are notable for our small size, porous borders, and for being prone to natural hazards and eternal shocks”. Therefore, transnational help is needed to help stem the flow of arms into our borders, to mitigate the effects of climate change, and to cushion us from largely made-in-America economic shocks and recessions. The prime minister was dead right.

“These factors reduce our ability to mount effective national responses to domestic, regional and global peace and security challenges.”

In a paper prepared by the Economic Commission for Latin America and the Caribbean (ECLAC) for the recent financing development conference in Addis Ababa, (Financing for Development in Latin America and the Caribbean), the organisation notes that only five of the 28 donor countries are meeting the target of 0.7 per cent of gross national income pledged. ECLAC observes that, “the post-2015 development agenda represents a universal transformation in the way countries view and understand sustainable development. In order to achieve the broad list of development goals that will form part of the agenda, the financing for development architecture will need to mobilise vast amounts of resources and to change the way in which resources are obtained, organised and allocated”.

The prime minister boldly baked the ECLAC call for a comprehensive multilateral debt relief for the Caribbean (note she was not talking about debt to private creditors or signaling any debt repudiation.) She was making the reasonable call for multilateral institutions to write off the debt of countries like Jamaica whose development prospects, despite their best efforts, are hampered by this debt burden. In that way, she joins the Congressional Black Caucus which recently made a call for some debt adjustment on Jamaica’s behalf.

 

PER CAPITA INCOME

Jamaica, yet again, through Prime Minister Simpson Miller, righty raised the issue, now a lobbying point, for middle income countries like Jamaica being reclassified to receive concessionary financing. This must be heeded. It makes no economic sense to lock out countries like Jamaica from key development assistance simply because of per capita income. Economists have long stressed that per capita income masks vast inequalities and disparities. It is a grossly inadequate means of assessing development needs. This outmoded way of classification must be revised. It was good that the prime minister took that issue to the Security Council.

As the ECLAC paper points out sensibly, it is misguided to exclude countries from development finance flows on the basis of income criteria alone, “if funding is to be deployed efficiently and effectively to accelerate progress toward sustainable development across all income levels”. Financing Development in Latin America and the Caribbean says, “per capita income does not capture a country’s capacity to sustain long-term development without recourse to aid, nor does it provide a representative measure of its level of development”.

RECLASSIFICATION

Some Jamaicans have foolishly interpreted Jamaica’s campaign to get reclassification for concessional financing as hypocrisy. How can we boast and celebrate our Emancipendence while lobbying to be classified as poor? They might find it ironic that our prime minister went to the UN to ask for debt cancellation on the eve of our Emancipation and Independence celebrations! But there is no contradiction. It is empirically driven. Some 60 per cent of those living in poverty and 50 per cent of the indigent reside in upper middle-income countries of Latin America and the Caribbean. Our skewed income distribution and inequality is what accounts for our per capita income putting us out of the reach for certain kinds of development assistance.

Sub-Saharan Africa has been making significant economic strides over the last few years, but they could not have done so without substantial debt write-offs and concessionary financing. The Caribbean needs similar treatment. Mobilising domestic resources will not be enough. Carrying out an austerity programme, implementing economic reform and improving governance will not suffice to get us to the next level. We need to drop the myopia and understand that our putting our house in order is a necessary but not sufficient step to sustainable development.

If we think the growth mantra alone is enough to bring us economic salvation, we have another guess coming. As the prime minister said at the Security Council last week, our middle income designation limits our ability to access critical development funding. ECLAC also says in its paper: “Domestic resource mobilisation strategies must be placed within the broader context of an enabling environment … . This external environment must reflect the importance of developing countries in its governance structure, avoid discrimination in access to funding … enhance international trade participation of developing countries.”

LIFTING SMALL BOATS

The IMF’s managing director, Christine Lagarde, gave a very sobering address on June 17 in Brussels titled, ‘Lifting Small Boats’. She confessed in that speech that “in too many countries, economic growth has failed to lift these small boats. In too many cases, poor and middle class households have come to realise that hard work and determination alone may not be enough to keep them afloat. Too many of them are now convinced that the system is somehow rigged, that the odds are stacked against them”.

Ms Lagarde went on to say, “You do not have to be an altruist to support policies that lift the incomes of the poor and middle class. Everybody will benefit from these polices because they are essential to generate higher income, more inclusive and more sustainable growth.” That essentially was the message our prime minister took to the UN Security Council last week.

 

published by The Gleaner.

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