Caribbean countries could soon face tougher access to financial help from the International Monetary Fund (IMF) and the World Bank, as the Donald Trump administration shifts away from funding climate resilience and social development, a prominent regional economist has cautioned.
Professor Don Marshall, director of the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES) at the University of the West Indies at Cave Hill, issued the caution on Monday in his analysis of recent reforms proposed for the Washington-based international financial institutions by US Secretary of the Treasury Scott Bessent.
The suggested reforms to the current emphases of the Bank and the IMF bear the stamp of Trump’s 2.0 domestic and global agenda for the US.
“It will see after a disciplinary market-oriented approach to development, marked by a commitment to energy abundance, adherence to finance sector-led growth, and a deliberate swerve away from climate resilience, and gender-sensitive policy framing, issues deemed outside the core agendas of these two Bretton Woods institutions,” Prof. Marshall told Barbados TODAY.
The SALISES director said that much of those adjustments correspond to a Department of Government Efficiency-style (DOGE) cutting of administrative costs and functions.
“There is to be a return to the more formulaic approach to fiscal and macroeconomic reforms, leading to a reduced reliance on IMF financing, especially among middle-income countries that fall into balance-of-payments and require assistance,” he said.
“There is an announced greater commitment to enhancing the fund’s surveillance role. This applies to countries in IMF programmes, but it extends to the annual consultations and reviews conducted by IMF teams across several countries.”
Turning to the implications of the proposed reforms for Barbados and other small island developing states (SIDS), Professor Marshall warned: “The end of the Resilience and Sustainability Trust arrangement under the IMF puts to an end a recent shift towards a holistic approach to sustainable growth. Some staffers within the bank and fund will be disappointed. So, too, many regional policy specialists who pointed to the trust facility as offering SIDS an avenue for the securing of concessional financing to assist with climate change mitigation and adaptation.
“The increasing surveillance of the fiscal and budgetary conduct of countries will lead to stricter assessments of debt management, the pace and implementation of reforms, and the like. Reforms of Barbados’ State-owned enterprises have been patchy, if not incomplete; the size of the country’s fiscal deficit remained a point of earnest discussion, and… the cost of government fell below ideal expectations whilst the country was in the recent IMF programme.”
Caribbean countries are wrestling with costs associated with climate mitigation, high youth unemployment, sustaining social safety nets, rising oil and fuel imports, cost-of-living spikes, and the need to modernise infrastructure.
The economist therefore suggested there “really is no way around running deficits and relying on a variety of creditors to secure foreign loans. Such policy actions will result in overt criticism from the fund and could lead to negative forecast reports”.
Another implication identified by Professor Marshall is that of greater intolerance for multi-year programmes with the IMF, especially among middle-income countries, and an explicit reference to the need to end prolonged reliance on its financing.
He noted Barbados’ last engagement with the fund, which lasted for seven years, with the first IMF Barbados Economic Recovery and Transformation programme running from 2018 to 2022, and the second iteration lasting until June 2025.
“These [initiatives] restored economic confidence and provided a source of concessional loan finance to undertake reforms in tax administration and other government services,” said Professor Marshall. “Other key targets, chiefly related to closing and sustaining a small fiscal deficit, have only been partially achieved. Future engagement with the fund will feature a less patient approach to achieving the agreed fiscal performance targets.”
But he cautioned: “We can no longer expect to broker agreement for consideration of the region’s climate vulnerabilities.”
The US administration is seeking to delimit the scope of the IMF, returning it to the “narrow realm” of balance-of-payments adjustments while steering the World Bank to concentrate its investment support for more fossil-fuel-based energy projects, private sector growth, and reducing poverty, he said.
“The unique challenges of SIDS and the social disparities arising out of the region’s colonial legacy will bear little moderating effect on the renewed austere approach recommended for the fund and bank,” the SALISES director added.
Bessent announced that the IMF and the World Bank can support American efforts to secure a more balanced, prosperous, and stable global economy through a return to their core missions and disciplined deployment of their resources.
“We have seen some progress towards these goals since the Spring Meetings,” the US treasury secretary declared. “The IMF is folding its climate and gender units into one that is focused on macro-financial and structural policies, and management has eliminated extraneous, non-core issues from its Board Work Programme.”
Bessent added: “The World Bank has moved in the direction of an all-of-the-above approach to energy by removing its prohibition on the financing of nuclear power generation. And the Bank has increased the weight given to quality in procurement decision-making and boosted outreach to industry, both of which stand to improve the efficiency and effectiveness of its financing.”
emmanueljoseph@barbadostoday.bb
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