CMC:– President of the Caribbean Development Bank (CDB) Dr Hyginus ‘Gene’ Leon, has proposed that the US$2.5 billion in Special Drawing Rights (SDRs) available to Caribbean countries from the International Monetary Fund (IMF), be pooled to unlock even more financing in the capital markets.
The SDR is an interest-bearing international reserve asset created by the IMF. Members can use their SDR allocation to supplement or build their national reserves instead of accruing debt.
Speaking at the second edition of the CDB’s President’s Chat forum on Friday, Leon advised that combining the recent SDR allocations assigned by the IMF could be the practical and powerful collaboration needed to improve the economic position of the region.
Leon, who worked with the IMF for more than two decades, said that rather than each country drawing down and using its individual allocation, a more effective solution would be a combined financial instrument for the region’s benefit.
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“Alternatively, we have an opportunity to say, ‘what if we pool all of that 1.7 billion SDRs – [about] US$ 2.5 billion, and now invest it into an equivalent reserve asset type of instrument that could be issued by a CDB,” he said, indicating how this financial instrument could then be used to invigorate the capital markets and access more and better financing for the Caribbean’s development needs.
“It will call for us recognising that individually if we used our SDR allocations or even if we left it there, we are much worse off than we could be if we were to pool and now utilise those SDRs through the mechanism of leverage in a way that helps build the very capital markets we say we don’t have. But it calls for collaboration, cooperation in a regional sense,” he added.
Leon has also sounded his intention to present a proposal to Caribbean Community (Caricom) Heads on a financial mechanism to achieve this objective.
Barbados Prime Minister, Mia Mottley, who was also in attendance at the CDB’s President Chat forum, also used the opportunity to urge the CDB to advance the proposal quickly. She pointed out that many countries across the region may have already made decisions on how they will use their SDR allocations.