Caribbean & Central America - January 2024

*** SOME PROGRESS AT COP28. The 39-member Alliance of Small Island States (AOSIS), of which 16 are Caribbean states, was founded in 1990 and has been advocating for the establishment of a Loss and Damages Fund since the inception of the Conference of the Parties (COP) in 1995. The latest COP gathering, COP28, did at last produce such a fund, but it was an achievement that AOSIS chairman Toeolesulusulu Cedric Schuster described as “a relief” rather than a win.

As host of COP28, the United Arab Emirates pledged US$100m to the fund, with the EU providing US$145m. Contributions from the UK, US, and Japan, among others, bring the total fund to over US$400m so far. But Schuster sees this as just the start, saying: “It’s not enough. We need at least about US$100m a year to really address the loss and damage issue.” The prime minister of The Bahamas, Philip Davis, added: “We cannot be silenced by commitments and pledges. We want them to commit, pledge, and write the cheque.”

*** GUYANA’S GOOD FORTUNE CONTINUES. In early December, the International Monetary Fund (IMF) concluded its latest Article IV Consultation with Guyana and issued a glowing report that noted: “The Guyanese economy continues to experience record growth, supported by the government’s modernisation plans and unparalleled oil and gas sector expansion…Overall real GDP growth is projected to grow 38.4 percent in 2023 and on average of 20 percent per year during 2024-28.”

Downside risks identified by the IMF include “inflationary pressures and the appreciation of the real exchange rate beyond the level implied by a balanced expansion of the economy”. However, it believes these threats are containable, and it says that “Staff assess the 2023 policy mix to be appropriate, with fiscal policy increasing public investment to address the large development needs, and broad money growing in line with non-oil GDP”.

*** IMF RECOMMENDS MORE SUPPORT FOR SURINAME. The International Monetary Fund (IMF) has concluded the fourth review of Suriname’s 36-month Extended Fund Facility (EFF) approved in December 2021, and the review team has recommended to the IMF board that it approve an increase in IMF support to Suriname of US$63m and an extension of the programme to March 2025. This would raise the IMF’s support for Suriname to around US$650m. The review concluded that “program performance has been strong and all performance criteria for this review were met”.

The review added that the Suriname authorities’ efforts to stabilise the economy “are bearing fruit”. Growth is expected to come in at around 2% for 2023, and inflation is projected to fall to below 20% by the end of 2024. However, the IMF warns, “the authorities face important near-term risks, including policy implementation challenges stemming from a more challenging socio-political climate and capacity constraints”.

Regarding the threat of unrest, the IMF says: “The fragile economic recovery and rising social tensions call for a more measured pace of fiscal consolidation in 2024. Staff and the authorities agreed to reduce the 2024 primary balance target from 3.5 to 2.7 percent of GDP. The 3.5 percent of GDP primary balance target, which underpins debt sustainability, will now be reached in 2025.”

On debt, the IMF commends the “excellent progress” on restructuring, with the finalisation of the debt exchange with private bond holders. The participation rate is over 96%. Agreements with remaining official creditors are close to conclusion, and the IMF reports that the government “has also made progress in clearing domestic arrears and restructuring domestic debt”.