IDB calls for greater institutional reforms in the region to spearhead recovery from COVID-19

IN the wake of changing times brought on by the novel coronavirus pandemic, The Inter-american Development Bank (IDB) has stressed the need for countries in the region to embark on greater institutional and infrastructural reforms to foster economic recovery.

In its most recent quarterly bulletin, the IDB said that with the majority of countries, including Jamaica, Barbados, The Bahamas and Suriname having experienced double-digit contractions to real gross domestic product (GDP) this year as a result of the pandemic, governments must act with alacrity to advance recovery programmes.

With tourism suffering severe contractions and returning at a painfully slow pace in much of these countries which heavily rely on the sector, governments are urged to commence more sustainable programmes aimed at growth.

“Governments must begin to plan now on how they can get their economies up and running again on a much better footing than before. We identify two areas that are crucial: infrastructure and institutional reforms,” said David Rosenblatt, IDB’S regional economic advisor.

The IDB said that it is through the building of proper economic institutions that a resilient Caribbean can be created to provide a much-needed boost for most of these developing countries in the COVID-19 aftermath. This as these institutions become critical in the long run, also helping to manage shortterm cycles and spur higher productivity.

“A sound institutional framework by no means constitutes a fully fledged protective shield against such devastating shocks but it provides a more formal structure to respond to them. Countries that have engaged in institutional development have proven better equipped to confront these challenges, more resilient in responding to them, and have better prospects to recover more rapidly,” the report stated.

“For fiscal policy to be more sustainable, monetary policy to be more effective, and financial systems to be more resilient and competitive, each set of economic institutions needs to work in tandem among themselves and with the other economic institutions,” it continued.

Among some of the institutions outlined by the report were fiscal reforms through sound management and discipline, fiscal rules and independent fiscal councils along with sovereign wealth funds, financial regulation and inclusion.

Nigel Clarke, minister of finance, in expressing similar sentiments at a recent economic update briefing,said that Jamaica was already on a path to building out its institutional framework through the requisite reforms. He cited the recent launch of an investment map done in partnership with the IDB, along with an independent central bank and a fiscal commission as being among the key strategies.

“It is symbolic that though there is a pandemic and these are not normal times, the Government is proceeding with its pre-pandemic plans to strengthen and build institutions to ensure that we all recover stronger. What we want to ensure is that the policies we pursue [are] such that in lean times we have the policy flexibility to respond to economic downturns in a way that shortens those downturns , cushions the impact, and returns Jamaica to a path of expansion in the quickest possible time,” the minister has said.