On 14 October, IMF Managing Director Kristalina Georgieva warned that higher borrowing costs, falling development assistance and other economic pressures threaten to widen the distance between advanced and developing economies. She appealed for additional resources for the Fund’s Poverty Reduction and Growth Trust and its Catastrophe Containment and Relief Trust, which assist low-income and particularly vulnerable countries.
That appeal deserves support. The poorest countries should not be abandoned.
But the discussion must also include countries whose vulnerability is obscured by their designation as middle-income or even high-income economies. Several Caribbean states fall into these categories. Their income classifications say something about their economies, but far less about their capacity to withstand a major disaster or a prolonged collapse in earnings.
This is hardly a new argument.
As far back as October 2009, I wrote about Caribbean leaders who attended the IMF and World Bank meetings in Turkey seeking relief and restructuring for the debt of vulnerable, middle-income countries. The late David Thompson, then Barbados Prime Minister, explained that restricted access to World Bank funding had pushed countries towards private borrowing at higher interest rates and with shorter repayment periods.
Seventeen years later, the region is still having to make the case that the terms on which countries borrow can determine whether they develop or spend years struggling to meet payments.
There has been progress, and it should be acknowledged.
The World Bank’s International Development Association makes provision for some small economies above its normal income threshold. The IMF’s Resilience and Sustainability Trust also provides longer-term financing for eligible vulnerable middle-income countries and small developing states. These arrangements are important departures from a system that relied too heavily on income alone.
However, eligibility for a particular facility does not settle the larger question of whether a country can obtain sufficient financing, on suitable terms, when it needs it. Nor does a new loan remove the burden of existing debt.
For Caribbean people, that burden has practical consequences.
Money committed to debt payments cannot also purchase medical equipment, improve schools or repair water systems. When governments have little room to spend, necessary work is postponed. Roads deteriorate, public services struggle and opportunities for young people diminish.
The consequences extend beyond government budgets. Businesses depend on reliable electricity, functioning ports, good roads and workers with the skills their enterprises require. A government unable to finance these services will find it harder to support the economic activity from which future revenue must come.
Debt can therefore weaken the very capacity needed to repay it.
None of this excuses careless borrowing, wasteful expenditure or poor administration. Caribbean governments owe their people transparent accounts, sound procurement, competent debt management and investments that can withstand scrutiny. Borrowing for projects with doubtful benefits places an unfair obligation on future taxpayers.
The region’s case is stronger when governments demonstrate that they are managing public money responsibly.
But even the best-managed small state cannot prevent a hurricane, control international oil prices or stop a recession in the countries from which its visitors arrive. Nor can it spread those risks across the range of industries and markets available to a much larger economy.
Consider a country whose hotels, roads, electricity network and homes suffer extensive damage in a single storm. Its government faces urgent expenditure just as tax receipts decline. It must restore essential services and help people recover their livelihoods while continuing to meet obligations incurred before the disaster.
An income figure calculated before the storm offers little guidance on what that government can now afford.
There is also a distinction between borrowing to create new productive assets and borrowing to replace what has been destroyed. Replacing a bridge may restore an essential connection, but it does not necessarily create the additional income needed to service another loan. Repeated reconstruction can leave a country owing more simply to recover the standard of living it previously enjoyed.
International financing arrangements must take account of this reality.
The United Nations General Assembly adopted the Multidimensional Vulnerability Index (MVI) in August 2024. Antigua and Barbuda’s Prime Minister, Gaston Browne, co-chaired the UN High-Level Panel that developed it, alongside Norway’s former Prime Minister, Erna Solberg. The index provides a fuller assessment of countries’ vulnerability to external shocks and their structural capacity to withstand them. That work should inform actual financing decisions, including access, interest rates and repayment periods. Recognition of vulnerability is of limited use if it leaves the terms of borrowing untouched.
There should also be wider provision for suspending debt payments after major disasters, allowing governments to direct scarce resources towards immediate recovery. Such arrangements should be agreed before emergencies occur, when there is time to settle the terms properly.
Where repeated disasters have contributed substantially to unsustainable debt, creditors should be prepared to examine restructuring and relief. Grants and deeply concessional finance should carry a greater share of the cost of adaptation and disaster recovery.
Caribbean governments and regional institutions have already done substantial work to advance this case. Barbados’ Bridgetown Initiative, the MVI, and the Caribbean Development Bank’s collaboration with other development banks on debt and resilience financing demonstrate serious regional effort.
These initiatives require decisions by international governments and institutions with the power to change financing rules and provide resources. Caribbean countries can develop proposals, supply evidence and negotiate persistently. They cannot, by themselves, secure changes that depend on the agreement of major shareholders and creditors.
The forthcoming Commonwealth Heads of Government Meeting in Antigua and Barbuda offers an opportunity to press influential governments for specific commitments to advance these proposals within international financial institutions.
The people of small Caribbean island-states need financing arrangements that give them a reasonable chance to build, recover and advance. An income classification should help explain a country’s circumstances. It should never become an excuse for ignoring them.