Caribbean & Central America - June 2023

Barbados’ Prime Minister Mia Mottley stepped up her campaign for increased debt relief for countries suffering the impact of climate change at the end of April, with France and Zambia agreeing to support her Bridgetown Initiative.

The Bridgetown Initiative was first launched in July 2022 and has gone through various versions. The essential proposal covers five points, including a pause in debt repayments for poor countries when they suffer natural disasters such as hurricanes or other forms of extreme weather; increased global funding for climate resilience; the creation of a global climate mitigation trust; wider eligibility to allow poor countries to access below-market interest rates; and, finally, a new global loss and damage fund, able to pay out when disasters hit. Various financial targets have been proposed, including the idea that the World Bank and the International Monetary Fund (IMF), through an issue of special drawing rights (SDRs), should mobilise up to US$1trn in extra resources to help developing countries strengthen climate resilience.

Mottley’s initiative faces a number of challenges. One is the lack of political will among the more developed countries – they have for example fallen well short of promises, originally made in 2009, to provide US$100bn in resilience and energy transition funding (one estimate is that to date only US$16bn has been paid out). Another is the painful aftermath of the coronavirus (Covid-19) pandemic, which has depleted financial buffers world-wide and led to further growth in developing country debt.

Nevertheless, Mottley has been building a new coalition, led among others by France, Spain, and Sierra Leone to try and move forward. In late April she said “The world is running out of time to fix its international financial system that is broken, outdated, infested with short termism and downright unfair. Too many countries are being prevented from fighting the climate crisis and from creating decent opportunities for billions of people – their citizens. If countries cannot access the finance they need at rates they can afford, the world will lose the battle, not simply the countries. What is good for the North is good for the South, East and West! This is the best development strategy for the people of the developing world. This is the best development strategy for the planet.”

Meeting on global financial pact

Mottley and France’s President Emmanuel Macron are co-hosting a 22-23 June meeting on a global financial pact, which will discuss reforming multilateral development banks, the debt crisis, and the potential for new international taxes and financial instruments (it has been suggested for example that a global 2% tax on fossil fuel exports could fund the proposed climate change “loss and damage” aid scheme). Economist Avinash Persaud, who has advised Mottley on the Bridgetown Initiative, describes the Caribbean as one of the world’s most indebted regions, with debt levels averaging 90.1% of GDP since the start of the coronavirus (Covid-19) pandemic. “We found that 50% of the increase in our regional debt could be traced back to some natural disaster that we had to pay for ourselves” he says.