The event is the first in a series of educational webinars targeted at the Caribbean, addressing fiscal policy to build resilience in small states. This initial event will disseminate the recent World Bank Group (WBG) publication “Fiscal Rules and Economic Size in Latin America and the Caribbean” which examines how to design fiscal rules that are appropriate for the challenges facing disaster-prone small states, building fiscal space, and enhancing policy credibility. The webinar will also entail knowledge-sharing from a panel of regional and international experts who will make contributions in the following areas: (i) past country experiences with implementing fiscal rules; (ii) design of fiscal frameworks in the Caribbean in line with sound international practice; and (iii) opportunities for regional cooperation in fiscal responsibility (oversight, management of contingency funds, risk pooling, etc).
The COVID-19 pandemic was an unprecedented shock that caused severe economic recession in Caribbean small states and led to increased public debt as governments engaged in unplanned fiscal spending to respond to urgent needs. In dealing with this extraordinary situation, many small states suspended their fiscal rules. For example, Grenada, Dominica and St. Vincent and the Grenadines evoked escape clauses to be able to undertake additional fiscal spending for emergency response and income support measures. This unprecedented situation, coupled with the inherent vulnerabilities of Caribbean countries to weather-related natural disasters, raises once again the issue of limited public resources compared to the daunting financing needs to build resilience. Building economic resilience will require systematic prioritization and a credible framework to create fiscal space. A well designed and effectively implemented fiscal framework, with appropriate rules, can be essential in enabling countries to build buffers, maintain fiscal sustainability and improve policy credibility. As countries look to re-instate their fiscal rules, several are exploring how these rules can be improved to better support the unique challenges faced by highly vulnerable small states like those in the Caribbean.