The Mia Mottley administration has outlined a three-step plan to encourage urgent and decisive action to address an unprecedented combination of crises, through a reformed international financial system.
It includes debt service suspension and an expansion of lending by multilateral lending agencies.
The 2022 Bridgetown Agenda for the Reform of the Global Financial Architecture plan seeks to address the cost of living, debt and climate crises facing Barbados and other developing nations.
The Bridgetown Agenda was first mentioned by Prime Minister Mottley at the General Debate of the 77th United Nations General Assembly at UN headquarters in New York last Thursday.
In a subsequent statement outlining the three-point plan, the Government noted that the crises facing developing countries were compounded by tightening of monetary policies in developed countries and a strengthening US dollar.
“One in five countries is experiencing fiscal and financial stress. Unaddressed, there will be deepening hardship, debt defaults, widening inequality, political upheaval, and a delayed shift to a low-carbon world.
“Global leaders are now experienced in managing crises. They know what to do and have the means necessary. We must act now. We cannot be good at rescuing banks but bad at saving countries,” it stated.
Step one of the plan calls for the provision of emergency liquidity “to stop the debt crisis in its tracks”.
“We call upon the Board of the International Monetary Fund to return access to its unconditional rapid credit and financing facilities to previous crisis levels; temporarily suspend its interest surcharges; re-channel at least US$100 billion of unused Special Drawing Rights (SDRs) to those who need it and; operationalise the Resilience and Sustainability Trust by October 2022,” the Barbados Government stated.
At the same time, it said, the G20 should agree to an ambitious debt service suspension initiative that includes all multilateral development bank loans to the poorest countries and COVID-related loans to the middle-income.
“Major issuers of debt to the markets should help normalise natural disaster and pandemic clauses in all debt instruments to absorb shocks better,” it added.
Step two involves the expansion of multilateral lending to governments by US$1 trillion. According to the Government, liquidity is simply not enough, and investment is required to address the “systemic roots” of the crises.
It calls for the implementation of the recommendations from the independent G20 Capital Adequacy Frameworks Review by the end of this year, and for the World Bank and other multilateral development banks to “use remaining headroom, increased risk appetite, new guarantees and the holding of SDRs to expand lending to governments by US$1 trillion”.
“New concessional lending should prioritise attaining the Sustainable Development Goals everywhere and building climate resilience in climate-vulnerable countries,” it added.
The third step of the Bridgetown Agenda relates to the activation of private sector savings for climate mitigation and fund reconstruction after a climate disaster, through new multilateral mechanisms.
“Most climate-vulnerable countries do not have the fiscal space to adopt new debt. We must move beyond country-by-country responses that have become bogged down by issues of who should do more. We need a global mechanism for raising reconstruction grants for any country just imperiled by a climate disaster. And we need a new issuance of 500 billion SDRs (US$650 billion) or other low-interest, long-term instruments to back a multilateral agency that accelerates private investment in the low carbon transition, wherever it is most effective,” it explained.
The Government said the Bridgetown Agenda requires “a coalition of like-minded leaders” to support its implementation.
“We do not anticipate complete agreement on the detail and sequencing of the solutions above, but rather aim to support progress on this agenda through greater understanding, focus, priority, coordination, and unity of effort,” it said.