BASSETERRE, St. Kitts – AS the countries of the Eastern Caribbean continue to crawl from the wreckage of the failed British American Insurance Company (BAICO), Minister of Finance Hon. Dr. Timothy Harris said there are a number of lessons to be learned.
Harris, who served on the Eastern Caribbean Central Bank’s (ECCB’s) Subcommittee for Insurance, noted that although the region experienced unprecedented decline in tourism profits, skyrocketing unemployment and a weakened financial sector, many “vital lessons” can be still be gleaned.
His expressed concern that the region’s high public debt level restricts many countries from responding effectively to crises through fiscal policy measures. He went on to say that the recent economic crisis highlighted the region’s “inability to respond”, adding that the troubling period underscored the significant role of lending agencies.
“The important role of fiscal policy in mitigating the cost of the crisis has brought to the fore the importance of having enough flexibility to respond to adverse demand shocks without undermining fiscal discipline and long-term fiscal sustainability,” he stated.
The Finance Minister singled out the partnership of the ECCB, the World Bank and the International Monetary Fund for producing a timely fiscal response package that was diversified, targeted and sustainable to avoid “long-term debt explosion and adverse reactions of financial markets”.
The global crisis forced a more profound realization that the Federation exists in a global community, Harris said.
He indicated that as the world has only artificial barriers now, there is need for a system of international political economy. He explained that this approach would seek to encourage coordinated global response and ensure that representation in international governance reflects the world reality.
Another important lesson cited by Harris is the need for more diversified approaches to economic planning, policy development and implementation.
“In an increasingly integrated world, economic problems will affect the global environment and this will have a direct impact on small island states like ours. This crisis did not originate with us, yet we must be part of the solutions,” Harris asserted.
It is the view of the ECCB Monetary Council that there is urgent need to reform the region’s financial systems and to strengthen its regulatory framework.
According to Harris, these measures would curb the excesses that led to the global economic and financial crisis in the first place. In addition, he said it is critical that the region is able to “effectively and efficiently regulate modern financial instruments”.
Harris has committed that the governments of the region will continue to address the challenges that arise as the first signs of recovery are now being seen.
