Abstract Four 2010

GLOBAL

DEVELOPMENT STUDIES

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Volume Six Winter-Spring 2010 Numbers 1-2.

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THEME: THE GLOBAL FINANCIAL AND ECONOMIC CRISIS: IMPLICATIONS FOR THE CARIBBEAN REGION

THE IMF AND THE CARIBBEAN: FORGING A NEW POST-CRISIS RELATIONSHIP

Jwala Rambarran

Arthur Lok Jack Graduate School of Business

University of the West Indies, St. Augustine

Trinidad and Tobago

Prakash Ramlakhan

Department of Management Studies

University of the West Indies, St. Augustine

Trinidad and Tobago

Published Online: March 15, 2017

ABSTRACT

The Caribbean has been hit hard by the global economic and financial crisis through a sharp contraction of activity in key sectors, tourism, energy and alumina, a virtual sudden stop of foreign direct investment, and weaker remittances. Some Caribbean countries have been reluctantly turning to the International Monetary Fund, which overhauled its lending framework for financial support to weather the crisis. Others have delayed adjustment, preferring to rely mainly on fiscal stimulus. This article, therefore, discusses how the Caribbean can better engage the IMF in the post-crisis world. It highlights the various trade and financial channels through which the crisis has affected the Caribbean and analyzes the IMF’s response. The article proposes three key initiatives that the IMF should undertake to help the Caribbean manage post-crisis legacy effects: to assist in the creation of a Caribbean reserve pooling arrangement in order to maintain external stability and bolster regional competitiveness; to conduct a Caribbean-wide FSAP in order to provide a better perspective on regional financial stability; and to develop a new debt strategy, similar to that of the enhanced Heavily Indebted Poor Country (HIPC) initiative, to help high-debt middle-income Caribbean countries overcome their chronic debt problem.