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Statement April 14, 2022

Communiqué from the Small States Forum April 2022

1. Members of the Small States Forum (SSF) met virtually on April 14, 2022.

2. Small states today face an exceptional convergence of hardships. As a group, they experienced a much deeper economic contraction in 2020 due to the COVID-19 pandemic, and their rebound has been significantly weaker than other emerging markets and developing economies. The pandemic will leave a legacy of escalated debt burdens and scarring of human capital in many small states. Moreover, the global impacts of the war in Ukraine are now also undermining this sluggish post-COVID recovery, with many small states struggling to manage food and fuel price inflation, rising interest rates resulting from monetary tightening, and the capital outflows and rising borrowing costs that will ensue. These impacts are occurring against a backdrop of accelerating climate change, which affects small states, and especially island states, much more intensively than other countries.

3. We value the international community’s recognition of the special situation faced by small states and their multilateral and bilateral support, which has greatly expanded our ability to respond to the multiple crises. Yet our challenges are becoming harder, and our economic vulnerabilities are growing. To manage the triple challenge of addressing the impacts of the COVID-19 pandemic, the war in Ukraine, and accelerating climate change while also putting our long-term development programs back on track, our need for development financing will stay at elevated levels over the coming years.

4. The war in Ukraine has led to rising global fuel, food, and commodity prices, which are heavily impacting small states. Most small states are net food and fuel importers, and persistently high prices will result in deteriorating external accounts and adverse social impacts, especially for the poor. The social impact is expected to be particularly significant in small states with low per capita incomes and high poverty rates, mostly in Africa and the Middle East. Rising fuel prices are likely to result in further increases in already-high electricity costs in most small Caribbean states and in transport costs in the remote Pacific states. In addition, the long-awaited recovery of the tourism sector in some small states will be directly affected.

5. SSF members noted that COVID risks prompted some countries to close schools to combat the pandemic, with the result that many school-children, especially the poor and younger children, suffered large and unequal learning losses. Members supported swift action to accelerate learning for these children, through prioritizing education in stimulus and recovery expenditures. This should involve reaching every child and retaining every child in school, assessing learning loss levels, prioritizing teaching of the fundamentals (numeracy, literacy, and socio-emotional skills), enhancing catch-up learning, and supporting psycho-social health and well-being.

6. Previous SSF communiques have drawn attention to the high debt burden of several member states. These debt burdens have been exacerbated by the COVID-19 pandemic. High debt-servicing costs are constraining available fiscal space for the development and provision of services and crowding out domestic investment. International conflict as well as rising inflation and tightening monetary policy in advanced economies are likely to deepen this problem, raising the costs of borrowing. We value the technical advice of the World Bank and the IMF on improving fiscal policy, public investment programs, and debt management frameworks in our countries and we support the need for debt transparency. We look forward to their continued advocacy and support in the design and implementation of debt relief. We also call on the international community to consider other debt relief measures such as debt-for-nature swaps.

7. Small states have been at the vanguard in raising the alarm about climate change, which poses an existential threat to several of our member states. We appreciate the increasing global awareness about climate change following the 26th UN Climate Change Conference in Glasgow in 2021. Yet, the latest report from the Intergovernmental Panel on Climate Change is alarming, revealing the huge gap between climate pledges and action. We are concerned that the restructuring of global energy markets in a context of international conflict could spur increased medium-term production of fossil fuels and urge governments instead to act on the long-term benefits of investing in renewable energy sources to achieve sustainable energy security. In this context, we appreciate the World Bank Group’s commitment to achieving 35 percent in climate finance, and 50 percent of IDA and IBRD financing for adaptation, which is a top priority for small states. We call on the World Bank to give small states priority in undertaking analytical work to provide them with timely technical advice on adaptation measures.

8. IDA19 resources have been critical to most IDA-eligible small states in responding to the COVID-19 pandemic and maintaining public services. The SSF thanks IDA and its donors for the historic $93 billion IDA20 replenishment package, which is an important manifestation of the international community’s goodwill and solidarity. IDA’s policy of providing extraordinary concessional financing to small island states has enabled vital support to these vulnerable countries in the past. We call on IDA to provide sustained support to all small states with vulnerabilities.